How Does a Biweekly Mortgage Differ from a Monthly Mortgage?

Comparing Monthly and Biweekly
Mortgage Payment Plans
Annual Interest Rate
(as a decimal)
Principal (amount borrowed) $

Many lenders offer borrowers the choice between biweekly and monthly mortgage payments. Biweekly mortgage payments are paid every two weeks, and since there are 52 weeks in a year, this adds up to 26 payments per year. If you are currrently in a montly payment plan, you can refinance to a biweekly plan. In this case, your bank or lender will offer biweekly payments that are half the amount of your current monthly payment. Refinancing to a biweekly mortgage means you can pay off the loan faster, since you end up paying more money in a year's time, i.e., you pay the equivalent of 13 months rather than 12.

For instance, suppose you take out a 30-year mortgage on $80,000 at a 6% annual rate. Using a standard mortgage calculator, your monthly payments would be $479.64 every month. Biweekly payments would be $239.82 every two weeks. Howerver, since you pay more per year with a biweekly plan, it takes you less than 30 years to pay off the loan. In this particular example, it would take only 24 years and 6 months.

Biweekly mortgages are attractive to home buyers not only because they help borrowers pay down their home loans more quickly, but also biweekly plans cut borrowers' total interest payments.

To compare the length of lending periods and total interest payments, use the calculator above. This mortgage calculator will compare your payment options for a loan based on the annual interest rate and the amount borrowed. The higher the annual interest rate, the more dramatic the difference in length of time and total interest paid.

If you refinance your loan by switching to a biweekly mortgage, chances are you will have to pay refinacing fees or pre-payment penalties. Banks and lenders charge these fees to offset their losses when you pay down a loan faster, since banks make money off of high interest fees.

An alternative to refinancing with a biweekly mortgage is simply making small extra payments toward the principal of the loan. Depending on your contract, you may be allowed to make extra payments without incurring fees so long as the amounts are low. This will help you pay off a loan faster and cut the total interest paid.

© Had2Know 2010

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Weighing the Costs of Pre-Payment Penalties