What is a Biweekly Mortgage?

Angela Covo
Angela Covo
With a biweekly mortgage, the borrower makes a payment every two weeks.
With a biweekly mortgage, the borrower makes a payment every two weeks.

A biweekly mortgage is a home loan in which the borrower pays half the monthly payment every two weeks. The rationale for this type of loan is that it allows the borrower to pay the mortgage off faster. Instead of making 12 monthly payments per year, the borrower actually makes 26 half-payments because there are 52 weeks in a year. By making biweekly payments, the borrower actually pays the equivalent of 13 monthly payments every year.

Biweekly mortgage arrangements benefit homebuyers who plan to stay in the residence at least five years.
Biweekly mortgage arrangements benefit homebuyers who plan to stay in the residence at least five years.

The benefit of this payment plan is that by paying more every year, the borrower can realize savings on the total amount of interest paid because the principal of the loan is paid off faster. Depending on the size of the loan and the interest rate, borrowers can reduce the repayment period by several years and save thousands of dollars in interest. For owners who do not plan to stay in a home for more than five or six years, there is no real benefit in adopting the biweekly mortgage.

Another benefit of the biweekly mortgage for some borrowers is convenience. For those who are paid biweekly, it may be more convenient to split their payments and pay their mortgages on the same schedule. Before taking on a formal arrangement with a lender, borrowers should be certain they can afford to pay the extra amount required every year.

The biweekly mortgage can best be viewed as a budget tool. Some mortgage lenders and third party companies offer borrowers the opportunity to pay biweekly for a fee. Some companies charge a set-up fee to convert the traditional mortgage to a biweekly mortgage. Some companies also charge transaction fees to automatically deduct the biweekly amount from a borrower’s bank account.

It is not necessary to adopt a formal arrangement like the biweekly mortgage in order to achieve the same kind of savings. In fact, it may be cheaper and more cost-effective for a borrower to simply pay a little more toward the mortgage each month. The easiest method is to divide the monthly mortgage payment by 12 and add that amount to each month’s payment. For example, if the monthly mortgage payment, principal and interest, is $1,200 US Dollars (USD) per month, a borrower can divide that amount by 12, which equals $100 USD. Adding the extra $100 USD to the monthly payment will have the same effect as the biweekly mortgage payment plan, because it is like paying an extra month every year. Borrowers must be sure to instruct the bank to apply any additional amount paid to the principal of the loan.

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Discussion Comments

anon108486

The bi-weekly mortgage plan can not only shorten the terms of your mortgage loan, it can also dramatically reduce the effective interest rate you pay.

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    • With a biweekly mortgage, the borrower makes a payment every two weeks.
      By: nito
      With a biweekly mortgage, the borrower makes a payment every two weeks.
    • Biweekly mortgage arrangements benefit homebuyers who plan to stay in the residence at least five years.
      By: bmak
      Biweekly mortgage arrangements benefit homebuyers who plan to stay in the residence at least five years.