Save Money with Bi-Weekly Mortgage Payments

By Bob Dorn and Carla Hartman, Mortgage Lenders

Bi-weekly mortgage payments save you money by helping you pay off your mortgage faster. Bi-weekly payments actually allow you to make one extra payment each year.

Here’s how it works. Instead of making one single monthly mortgage payment you make a mortgage payment every two weeks. There are 52 weeks in a year which is equal to 26 half mortgage payments a year…or 13 monthly payments a year instead of 12.

There’s one catch. You cannot just mail in a half payment twice a month and expect that you are paying bi-weekly. You actually do have to set-up a bi-weekly payment system.  Contact your mortgage company to set this up. Be aware that a fee might be charged for this service; however, if it’s a one-time fee for the initial setup it is likely worth the fee. If it is an initial fee plus a per transaction fee it may not be worth it.

If your mortgage lender does not allow bi-weekly payments or the fee is simply too steep, there is another way to incorporate the same concept. Take your monthly mortgage payment, divide it by 12 and add that amount to each mortgage payment. For example, if your monthly payment is $1020, you would add an additional $85 per payment. This will equal one full additional payment by the end of the year just like a traditional bi-weekly payment.

So, it’s a little extra work and a little extra money but the benefits of bi-weekly payments pay for themselves.

• You will increase the amount of equity in your home sooner
• You will save money by paying less interest on your mortgage
• You will decrease the outstanding principal loan balance faster