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Biweekly Mortgage Payments: Accelerate Your Home Equity

Updated: Jan 3

Biweekly Mortgage Payments: Accelerate Home Equity

Buying a home is one of the most significant investments you'll make in your lifetime, and for most people, it involves taking out a mortgage. While a typical mortgage payment is made monthly, some homeowners choose to make biweekly mortgage payments instead. Biweekly mortgage payments can help you save thousands of dollars in interest and accelerate your home equity. In this blog post, we will explore the power of biweekly mortgage payments, what they are, how they work, their advantages, who should consider them, common misconceptions, and answer some frequently asked questions. Whether you're a first-time homebuyer or a seasoned homeowner, this post will provide you with valuable insights to help you make informed decisions about your mortgage payments.


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The Power of Biweekly Mortgage Payments: A Simple Strategy to Reduce Interest and Accelerate Home Equity

The Power of Biweekly Mortgage Payments

Buying a home is one of the biggest investments we make in our lifetime. As homeowners, we are committed to repaying our mortgage on time, but the thought of paying off a large loan over a long period can be daunting.


Fortunately, there is a simple strategy that can help: biweekly mortgage payments. Biweekly mortgage payments involve making half of your monthly payment every two weeks instead of one full payment each month.


This may seem like a small change, but it can have a significant impact on your finances. Here’s how:


The Benefits of Biweekly Mortgage Payments


By switching to biweekly mortgage payments, you can reduce interest charges and accelerate home equity. When you make 26 half payments per year instead of 12 full payments, you end up making an extra full payment each year.


This additional payment goes directly towards reducing the principal balance on your loan. This means that over time, you will accrue less interest since it is calculated based on the outstanding principal balance.


The less principal balance you have, the less interest you will pay overall. Additionally, making biweekly payments reduces the term of your mortgage by several years or more.


Let’s say you take out a $300,000 mortgage with an interest rate of 4% over 30 years; your total cost for borrowing would be approximately $515k at the end of 30 years if you made only monthly payments without any early repayments or refinancing opportunities during those 30 years (this amount includes both principal and interest).


However with bi-weekly repayments instead (i.e., half-payment once every two weeks), this amount would be reduced by almost $45k assuming all other factors remained constant.



How Biweekly Mortgage Payments Work


The biweekly mortgage payment system is relatively simple. Instead of making one full payment each month, you pay half your monthly mortgage amount every two weeks. By doing this, you make 26 half payments per year instead of 12 full payments.


This additional payment goes directly towards paying off the principal balance on your loan. In turn, this reduces the amount of interest you will pay over the life of the loan and helps to build equity in your property at a faster rate.


Who Should Consider Biweekly Mortgage Payments?


Biweekly mortgage payments can be an excellent option for any homeowner who wants to save money on interest and accelerate their home equity growth. However, it may be especially beneficial for those who have higher interest rates or those who are looking to pay off their mortgage faster. If you plan to sell your home in the near future or if you are considering refinancing, biweekly mortgage payments may not be a good fit for you since prepayment penalties could negate any savings.


Common Misconceptions About Biweekly Mortgage Payments


Some people believe that biweekly mortgage payments do not make sense if they plan on refinancing soon. Others think that it is a strategy only suitable for those with high-interest rates or those who have recently taken out a loan.

However, these beliefs are misconceptions. No matter what stage of homeownership you are currently in or what kind of rates and terms you have agreed upon with your lender, biweekly repayments can help reduce the overall cost and time required to repay the loan without penalizing early repayment, unlike many traditional loans' terms and conditions which limit borrowers ability to repay ahead of schedule or impose fees when they do so before the maturity date (i.e., prepayment penalties).


Alternatives to Biweekly Mortgage Payments


Biweekly mortgage payments are just one strategy for reducing the amount of interest you pay over the life of your mortgage. Other alternatives include refinancing your loan, making additional principal payments, or consolidating debt.


Before deciding on any strategy, it’s important to understand your goals and weigh all options carefully. Consider consulting a financial advisor to help you determine which approach is best for you.


Biweekly mortgage payments can be an effective and simple way to reduce overall interest charges and build equity in your property faster. By making 26 half payments per year instead of 12 full ones, homeowners can save thousands over the life of their loan while still enjoying the comfort and security of their own home.





What are Biweekly Mortgage Payments?

What are Biweekly Mortgage Payments?

Biweekly mortgage payments refer to a simple strategy for repaying your home loan. Instead of making monthly payments, you make payments every two weeks. By doing this, you can reduce the amount of interest you pay over the life of the loan and accelerate the build-up of equity in your home.


Define biweekly mortgage payments


Biweekly mortgage payments involve making half of your monthly payment every other week. This means that instead of making 12 monthly payments each year, you will make 26 half-payments. Since there are 52 weeks in a year, this works out to be equivalent to 13 full payments per year.


Explain how they differ from traditional monthly payments


Traditional monthly mortgage payments require one full payment every month, usually due on the first day or earlier in the month. With biweekly mortgage payments, you submit two half-payments per month that equate to one full payment at month's end.

One advantage of biweekly mortgage payments is that they allow homeowners to pay off their mortgages faster than traditional monthly schedules because they are paying more frequently (26 times a year versus 12). The homeowner is therefore increasing their equity balance at a quicker pace than with traditional repayment plans.


Another advantage is that by submitting biweekly repayments instead of waiting until the end of each month for regular repayments, homeowners can reduce overall interest charges on their loans since interest accrues daily based on the outstanding principal balance. The more frequent repayments also lower overall risk for lenders since borrowers are required to submit smaller amounts more often rather than larger sums once per month.


Homeowners enjoy less stress associated with balancing budgets and saving strategies by breaking down expenses into smaller increments instead of trying to set aside large lump sums once a month for what can be an overwhelming expense payment. Biweekly mortgage payments can save homeowners money, increase home equity, and reduce the stress of monthly payments by breaking them down into smaller increments.




Advantages of Biweekly Mortgage Payments

Advantages of Biweekly Mortgage Payments

Reduced Interest Charges: Paying Off Your Mortgage Faster


One of the primary benefits of making biweekly mortgage payments is that it can help you reduce the amount of interest you pay over the life of your loan. By making a payment every two weeks instead of once a month, you effectively make 26 half-payments per year, which is equivalent to 13 full payments. Over time, this can significantly reduce the total interest charges on your loan.


For example, if you have a $300,000 mortgage with an interest rate of 4%, and you make biweekly payments instead of monthly ones, you could save more than $30,000 in interest charges over the life of your loan. This can also help you pay off your mortgage faster since less money will be going towards interest charges.


Faster Equity Buildup: Owning Your Home Sooner


Another advantage to making biweekly mortgage payments is that it can help accelerate equity buildup in your home. Since each payment is applied directly towards reducing your principal balance, making more frequent payments means that more money goes towards building equity in your home.


This increased equity buildup can be especially beneficial for homeowners who are looking to sell their homes or refinance in the future. By building equity faster, they may have more options available to them when it comes time to make major financial decisions regarding their home.


Increased Savings Over The Life Of The Loan: More Money In Your Pocket


By reducing the amount of interest paid over the life of your loan and accelerating equity buildup in your home, biweekly mortgage payments also offer increased savings for homeowners. This can mean having more money available for other expenses or saving for retirement or other long-term goals.


In addition to these financial benefits, biweekly mortgage payments also offer peace of mind knowing that you are taking steps to pay off your mortgage faster and build equity in your home. For many homeowners, this can be an important factor in their overall financial planning.


Flexibility: Adaptable Payment Schedule


Another benefit of biweekly mortgage payments is that they offer a more flexible payment schedule than monthly payments. Since many homeowners receive biweekly paychecks, making biweekly mortgage payments aligns with their income schedule and can help them budget more effectively.


Additionally, some lenders may allow you to set up biweekly payments on a schedule that works best for you. This means that you can choose the dates for your payments to be made each month and adjust them as needed if your financial situation changes.


No Additional Costs: Save Money Without Extra Fees


It's worth noting that making biweekly mortgage payments typically doesn't incur any additional fees or costs beyond what you would pay for a traditional monthly payment plan. While some lenders may charge a fee for setting up biweekly payments, this is not always the case and can often be negotiated. Therefore, homeowners can save money without additional expenses when implementing this strategy.



How Biweekly Mortgage Payments Work

How Biweekly Mortgage Paym

Biweekly mortgage payments can be an effective way to reduce interest and build equity faster. The idea behind biweekly payments is simple: instead of paying your mortgage once a month, you pay half your monthly payment every two weeks. Over the course of a year, this adds up to one extra payment and can significantly reduce the amount of interest you pay over the life of your loan.


Setting up biweekly mortgage payments is relatively easy. Here's a step-by-step guide:


1. Check with your lender - Before setting up biweekly mortgage payments, check with your lender to make sure they allow them. Some lenders may not offer this option or may charge fees for setting it up.


2. Calculate your new payment - Divide your monthly mortgage payment by 12 to get the amount you need to pay every two weeks. For example, if your monthly payment is $1,200, divide it by 12 to get $100 per week.


3. Choose a start date - Pick a date that works well for you and aligns with when you receive income. Make sure to give yourself enough time before the first biweekly payment is due.


4. Set up automatic payments - Many lenders offer automatic withdrawal options that make it easy to set up biweekly payments from your checking account or other financial institution.


5. Monitor your account - Keep an eye on your account balance and make sure each biweekly payment is processed correctly.


Discuss potential fees and other considerations


When considering biweekly mortgage payments, there are some potential fees and other considerations that should be taken into account:


1. Set-up Fees – Some lenders charge an initial set-up fee for switching over from monthly payments.


2. Processing Fees – In addition to set-up fees, some lenders may also charge processing fees each time they process a new payment.


3. Prepayment Penalties – Before you decide to switch to biweekly payments, check with your lender and find out if there are any prepayment penalties in place. These penalties can nullify any potential benefits of biweekly payments.


4. Payment Timeliness – It is important to make your payments on time each month, as missed or late payments can lead to fees and potentially damage your credit score.


5. Interest Savings - While biweekly mortgage payments can help save interest over the long term, the savings may not be significant depending on your loan terms and interest rate.


When deciding whether biweekly mortgage payments are right for you, it is important to consider all of these factors and weigh the potential benefits against any associated costs or risks. Setting up biweekly mortgage payments can be a great way for homeowners to reduce their interest charges and build equity faster.


However, it's important to do your research and consider all of the potential fees and other factors before making a decision about whether this strategy is right for you.


By following the steps outlined above, homeowners can set up an effective biweekly payment plan that works well within their budget while also saving them money in the long run.




Who Should Consider Biweekly Mortgage Payments?

Who Should Consider Biweekly Mortgage Payments?

Accelerating Your Path to Home Ownership


Biweekly mortgage payments are a smart choice for homeowners who want to reduce their overall interest charges and pay off their mortgage faster. If you're someone who wants to own your home outright sooner rather than later, making biweekly payments could be the key to achieving your goal. By paying down your loan more quickly, you'll build equity in your home faster, which can provide security and financial stability in the long term.


Reducing Interest Charges


Another group of homeowners who should consider biweekly mortgage payments is those looking to reduce overall interest charges. This strategy allows you to make extra payments toward your principal balance without breaking the bank.


And because interest on mortgages accrues daily, the more frequently you make payments, the less time interest has to build up on your outstanding balance. Over time, this can lead to significant cost savings.


Those Who Can Afford It


Of course, biweekly mortgage payments aren't right for everyone. This strategy requires a level of financial stability and discipline that not everyone possesses. If making biweekly payments would put too much stress on your budget or prevent you from saving for other important goals (like retirement or emergency funds), it may not be worth it in the long run.


Couples with Dual Incomes or Seasonal Workers


Homeowners whose income fluctuates throughout the year may also want to consider biweekly mortgage payments. For example, seasonal workers who make most of their income during certain months could benefit from this strategy by making larger payments during peak earning times and smaller ones during slower periods.


Couples with dual incomes can also benefit from biweekly mortgage payments because they have more cash flow than a single-income household might have available for monthly mortgage expenses. By dividing up the payments every two weeks, the couple can spread the financial burden across each paycheck and reduce overall interest charges.


Those with Fixed-Rate Mortgages


Homeowners with fixed-rate mortgages may be particularly well-suited to biweekly payment plans. Unlike adjustable rate mortgages (ARMs), which are subject to changes in interest rates over time, fixed-rate mortgages offer stable, predictable payments that make it easier to plan ahead.


By using biweekly payments to accelerate your repayment schedule, you'll benefit from the predictability and stability of a fixed-rate loan while also building equity in your home more quickly. Overall, biweekly mortgage payments are a smart choice for many different types of homeowners.


Whether you're looking to pay off your mortgage faster or reduce overall interest charges, this strategy can help you achieve your goals while securing long-term financial stability. However, it's important to carefully consider your budget and financial goals before implementing this strategy to make sure it's right for you.




Conclusion

Conclusion

Biweekly mortgage payments are an excellent strategy for those looking to reduce interest charges and accelerate home equity build-up; however, it may not work for everyone's financial situation. There are other alternatives available such as extra payments, refinancing, acceleration programs, and increasing income & expense management which will also aid in the early repayment of debts including mortgages without any added costs from third-party intermediaries.


No matter what route you choose, it's essential always to weigh the costs and benefits of each strategy. By making a solid plan and sticking to it, homeowners can build equity faster, save money on interest charges, and possibly pay off their mortgage years ahead of schedule.


FAQ's


Can I set up biweekly payments with my current lender?


Yes, most lenders will allow you to set up biweekly mortgage payments. You can contact your lender to see if they offer this option and what the requirements are.


How much can I save with biweekly mortgage payments?


The amount you can save with biweekly mortgage payments depends on your loan amount, interest rate, and term. However, making biweekly payments can save you thousands of dollars in interest and help you pay off your mortgage faster.


Is there a fee to set up biweekly mortgage payments?


Some lenders may charge a setup fee to enroll in their biweekly mortgage program, while others may not. Be sure to ask your lender about any fees associated with setting up biweekly payments.


Can I switch from monthly to biweekly payments mid-loan?


It depends on your lender's policies. Some lenders may allow you to switch to biweekly payments mid-loan, while others may require you to refinance your mortgage to make the change.


Are biweekly mortgage payments right for everyone?


No, biweekly mortgage payments may not be the best option for everyone. Factors such as your financial situation, interest rate, and term should be considered before deciding to switch to biweekly payments. It's important to do your research and consult with your lender to determine if biweekly payments are right for you.


 
​Philip Bennett

​Philip Bennett


Philip is the owner and Licensed Mortgage Broker at Bennett Capital Partners. He earned his degree in Accounting and Finance from Binghamton University and holds a Master's Degree in Finance from NOVA Southeastern University. With more than 20 years of experience, Philip has been a leader in the mortgage industry. He has personally originated over $2 billion in residential and commercial mortgages.


Learn more about Philip Bennett's background and experience on our Founder's page. Whether you're a first-time homebuyer or a seasoned real estate investor, our team is here to help you achieve your real estate goals. Don't wait any longer, contact us today and let us help you find the right mortgage for your needs.


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