You have probably seen mortgage lenders advertising biweekly mortgage payment programs. These are programs where you send mortgage payments to your bank once every two weeks instead of once a month. (You send half of your monthly amount every two weeks.) It sounds like a great and simple way to save money and even cut a few years off your mortgage but you should be sure to read the fine print. Before deciding to go with a company’s bi-weekly payment plan, be sure that:
- The company will apply the partial payment to your mortgage on the day that it is received.
- The payment plan is for a bi-weekly payment plan (a total of 26 payments per year) and not a bi-monthly plan (a total of 24 payments per year).
- The company is not charging excessively high fees for their bi-weekly payment plan services. If the company wants to charge you for the bi-weekly payment plan, it is probably not worth it.
The real advantage to making bi-weekly payments is that you end up paying 13 full payments a year instead of 12. If the 13th payment goes directly toward your principal amount, then you are lowering the amount that you owe faster and can reduce your 30-year loan by up to 7 years. One way to accomplish the same thing as signing up for a biweekly mortgage payment program is to just send in an extra mortgage payment one time each year—consider doing this before setting up a bi-weekly mortgage payment plan.