Bi-Weekly Plan Smart?

Is it a good idea to pay your mortgage on a bi-weekly plan?

QUESTION: Does the bi-weekly mortgage plan save home-owners money?

ANSWER: It will save you a lot of money over the term of the loan, but not because it’s bi-weekly.  Paying half of your monthly mortgage every two weeks pays off a 30-year mortgage about eight years early depending on the interest rate. 

The reason it pays it off early is because you’re paying 26 half payments, which makes 13 whole payments each year.  So, all you’re doing is making an extra payment each year. 

Bi-weekly mortgage payments are not magic.  You can do the exact same thing by making an additional payment of 1/12 of your monthly payment each month.

You should not pay your mortgage company to set up a bi-weekly payment plan for you.  Never pay a fee to make extra payments on your mortgage.