Should You Be Making Bi-weekly Mortgage Payments?

Tuesday Dec 10th, 2019


The majority of borrowers pay off their mortgage in monthly installments. However, it’s not unusual to hear of borrowers who insist that paying bi-weekly is the way to go. Are these people on to something? Most banks offer borrowers the option of paying bi-weekly, but what are the benefits of going down that route? Could it pay off your loan faster? Will you pay less interest over time? Is it something everyone should be doing? Here’s everything you need to know about bi-weekly mortgage payments – and why you should probably make the switch.

How do bi-weekly payments work?

If you opt to make bi-weekly payments, then you would be making 26 payments per year instead of 12 payments per year under a monthly payment schedule.

Since some months have five weeks instead of four, you will find yourself making three payments in one month (i.e. the first, third and fifth Friday of the month). Because of this, there will be a total of 26 payments in a year, which means you will essentially be paying one extra month towards your principal every year.

How much will the payments be?

It depends on how much you owe. Typically, each payment will be half of your monthly mortgage payment. For example, if you were originally paying $1,000 a month, you would be paying $500 every other week under a bi-weekly payment schedule.

What are the benefits?

Since you are paying more towards your principal per year than you normally would under a monthly payment schedule, you will see significant savings, since you are reducing your principal faster and paying less interest overtime.

For example, if you have a $200,000 mortgage for 25 years and an annual interest rate of five percent, you would pay roughly $148,000 in interest if you pay monthly. When you switch to a bi-weekly payment schedule, you would only pay roughly $124,000 in interest and you’ll pay off your mortgage in 22 years instead of 25 years. Switching to bi-weekly payments means you would save almost $24,000 in interest. Plus you’ll get this giant debt load off your shoulders three years sooner.

But is it for everyone?

While making bi-weekly payments is a great way to save money, the downside is that you’ll need to be more diligent with your cash flow since you’ll now have to ensure that funds are available every other week as opposed to every month.

Paying off the mortgage early is a main goal for many, but there are some scenarios where it may not be all that advantageous:

  • Households that have not set aside enough money for emergency finds or retirement may want to put their money towards those savings first.
  • Individuals  who have to pay off higher-rate debts like credit cards may want to make that a priority before they put more money towards their savings
  • If the mortgage is for a rental property and the rental income is enough to caver the mortgage payments, then bi-weekly may not be necessary.

Whatever your financial situation, make sure to discuss your options with your mortgage specialist.

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