As a homeowner, you’ve no doubt received flashy flyers or intriguing emails that offer to help you pay off your home faster through biweekly mortgage payments. It is true that biweekly payments will pay off your home faster and save money, but there’s no need to pay a company to set up the payments for you.
The concept of a biweekly mortgage payment is pretty simple. You make half of your mortgage payment every two weeks. That results in 26 half-payments, which equals 13 full monthly payments each year.
That extra payment can knock eight years off a 30-year mortgage, depending on the loan’s interest rate.
How to Set Up a Biweekly Mortgage Payment
- Locate the principal and interest portion of your payment on your monthly statement and simply divide that number by two. For example, if the principal and interest portion of your payment is $1,500, your new biweekly mortgage payment is $750.
- Find out how or if your mortgage company handles biweekly mortgage payments. Some lenders will process biweekly payments while others refuse to accept partial payments at all. In any case, do not pay a fee to initiate a biweekly mortgage plan.
- If your lender isn’t open to biweekly payments, open a new bank account exclusively for your mortgage payment. Deposit your half-payment every two weeks and use that money to make your full mortgage payment either by check or automatic payment on every second deposit.
Things to Consider
- Make sure your extra payment goes where you want it to go. Make a note on your extra payment that it is to be applied to the principal portion of your loan.
- Don’t forget to include the tax and insurance portion of your payment each month. In our $1,500 payment example above, the $750 biweekly payment only covers principal and interest. You’ll have to pay the tax and insurance portion of your payment in addition to that.
- A biweekly payment is not a substitute for gazelle intensity. Once you reach Baby Step 5, start putting as much money as you can toward the mortgage to pay it off even faster.
- Biweekly isn’t the only early payoff option. If you divide your monthly payment by 12 and add that amount to each month’s payment, you’ll end up making one extra payment a year. You’ll increase your $1,500 payment to $1,625, but you won’t have to jump through a bunch of hoops with your lender to make it happen.
Making a plan to pay off your home early is smart. Another part of smart homeownership is buying a home at a reasonable price. One of Dave’s real estate Endorsed Local Providers (ELPs) can help you find the right home and negotiate a great price. If you’re ready to sell, your ELP will help you get top dollar for your house, putting you in a position to make a strong offer on your next home. Find your ELP today!