The Surprising Benefits of Biweekly Mortgage Payments

Butch on a Budget - Benefits of Making Biweekly Mortgage Payments

Once you’re earning decent money, your greatest tool when it comes to saving is to automate as much of your finances as possible.

Setting your credit cards on autopay eliminates paying interest on your balance, automatic deferrals to your retirement accounts build up your nest egg without you having to think much about it, and automating weekly contributions to your savings accounts is a great way to start an emergency fund.

One useful automation trick that will help you avoid thousands of dollars in interest and pay off your mortgage years early is by enrolling in biweekly mortgage payments.

Most folks stick with the default monthly mortgage payment so that you make 12 monthly payments in one year. That makes sense because that’s how most of us probably paid our rent before we were able to buy. But you’re not usually required to only make your payments once per month.

Many lenders offer a biweekly payment schedule. Paying your mortgage twice per month doesn’t mean that you’re paying double the mortgage, though. On a biweekly payment schedule, you pay half of your monthly mortgage cost every two weeks. This means 26 half-payments in a year, which actually ends up being 13 monthly payments.

In other words, you’re making one extra month’s payment on your mortgage each year that will go entirely towards the principal of your loan.

Since many people get paid on a biweekly basis, you can align your biweekly payments to coincide with your paydays. That way you’ll be making the extra half payments in the months that you receive an extra paycheck and won’t feel like you’re really paying extra.

Even with our low 2.75% interest rate, switching to a biweekly payment will save us over $15,500 over the life of the loan (!!!) and we’ll get rid of the mortgage 3.5 years earlier than if we stuck with the monthly payment schedule (!!!!!).

If you have a mortgage now (or if you get one in the future) you may want to seriously consider switching to a biweekly payment schedule. You can find out how much money and time it will save you by using this free online calculator.

If your lender doesn’t offer a biweekly option you can still get the benefits by either setting up your automatic monthly payment to include an additional 1/12 of your payment (so that by the end of the year you’ve made one additional month’s payment). Or, you can set a calendar reminder for yourself during those three paycheck months to manually make an extra half-payment towards your mortgage.

The biweekly mortgage payment is just another one of those small quick changes that can make a big difference to the bottom line over time.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: