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Why I am switching to biweekly mortgage payments

Last updated on February 1st, 2021 at 08:32 am

The default mortgage payments are made on a monthly schedule. This is the default for most mortgages as it breaks your payment up into 12 equal payments throughout the year. What is interesting about moving to biweekly mortgage payments is the impact on your total interest paid on your mortgage.

What is a biweekly mortgage?

If you look at a mortgage they are based on a fix amount of time. These can be 15, 20,25 or 30-year mortgage payments. The financial institution that is servicing the loan will take that length of time to determine your payment amount equally (this assumes you have a fixed mortgage). They usually do these equal payments on a monthly basis. A bimonthly mortgage is the same as doing a monthly payment plan. Instead of making 12 payments a year, you make 26 equal smaller payments throughout the year. Below, we will cover why you might want to make more frequent and smaller payments.

Frequent Payments = Faster Mortgage Payoff

Let’s do some basic math here and compare a typical 12 month mortgage vs a biweekly mortgage.

Imagine you take out a mortgage of $300,000 at a 3% interest rate. Below is how the payments defer.

Payment ScheduleYearly PaymentLifetime Interest SpentYears to Payoff
Monthly$15,177.22$155,332.3630
Biweekly$16,442.53$133,914.2925

If you look above the biweekly payment above will cost yearly $1265.81 more than the standard monthly payment. If you look closer, the reason is you are making one more payment than you would on the standard monthly payment cycle. This translates to 13 months of payments into one year.

Why pay more frequently?

I see this is a significant question of why do I want to spend more yearly? I budget each month based on my monthly spend and adding an extra $1265 a year to my bottom line impacts my available cash. This is a mindset I had to change and not think of a monthly payment but as a term of long-term payments and long-term costs.  If you look at the chart above you will see a total savings of $21,418.07 in just interest. That a nice chunk of change that can address other debt, invest, or do anything else with it. This also doesn’t mention that you are saving roughly about 4.5 years of payments that your home will be paid off free and clear.

Can I just pay more monthly?

One can always add additional payment to their principle payment. By doing that will pay off your mortgage sooner plus lower your interest payment. The issue I see here is discipline. It is too easy to change it or even cancel those extra payments. If you budget biweekly or change your monthly budget a bit, the cost can usually be absorbed with massive savings.  Personally, I found this was the best approach for me.

How can I set it up?

Some lenders have an automated payment system so you can make biweekly payments. This is a quick and easy way to switch how your mortgage payments are made. Some lenders do not offer biweekly payments (or can even charge a fee on it) so there are a few creative ways to make biweekly payments.

  • Set your calendar to pay manually to your mortgage ever other week.
  • Pay your monthly payment but make an additional payment in the middle of the month. You will need to calculate about 8% (1/12th) of your monthly payment and make an additional payment.
  • Pick a month throughout the year to make your additional monthly payment. The savings won’t be as high but it will still help.

Should you make the switch to bimonthly payments?

In your lifetime, I consider a mortgage will be one of your largest purchases. If there are ways to help reduce the overall cost of that mortgage would it be worth it? There are other reasons to switch to a bimonthly payment schedule, such as maybe building equity in your home faster. Maybe you can leverage that home equity to do some home improvements or refinance to help take on some debt. Do your math and analyze your current mortgage and situation to see if bimonthly payments are right for you.

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