A biweekly mortgage payment program can help you pay off your loan and increase the equity in your home faster than a traditional monthly payment program. You do this by making one-half of your normal payment every other week as a replacement for a full payment made once per month.

By making your payments using this method over the course of 52 weeks in a year, you would have a total of 26 payments per year and 13 full payments, instead of the typical 12 payments. The extra payments on a 30 year loan would help you pay off your mortgage by nearly 4 years, to as high as 8 years earlier (depending on your interest rate) than if you made your normal monthly payments.

The reason why you pay off your loan faster is because you are essentially making one extra payment a year, and are also paying off the interest on your loan quicker. The extra money you pay your lender every year would also be applied to your principal balance (amount you are still owing to the bank).

As your loan balance decreases over the years, you will have less interest charged over time. Hence, you reach your loan’s pay off date much earlier and you save money on interest as well.

For example, by paying biweekly on a 30 year mortgage at a 4% interest rate, you would shave off approximately 4 years and 2 months off your 30 year term to pay off your loan in 25 years, 10 months (310 months).

Homeowners can self-manage their own bi-weekly payments, or make arrangements through their lender via an in-house program. But please be aware that many lenders charge a fee for this service and some simply do not allow biweekly mortgage payments. For example, Citi Mortgage requires borrowers to pay an upfront fee of $375 and $1.50 for each “transaction” which would cost you a total of $1,350 over 25 years.

If you decide to do it yourself, you can just divide your monthly payment in two and make the 26 payments over the course of a year. You will want to make these payments using a check or paying online so you can designate to the mortgage servicer how the extra money will be applied to the principal. By paying online, you will have the option of where you want the extra payment applied, and if you have a bad month financially, you can just make your regular payment.

You may also want to speak with a customer service representative or put into writing to your mortgage servicer how the extra money will be applied to your loan. Many homeowners have complained that by sending in bi-weekly payments without an agreement with their mortgage servicer, has resulted in suspense payments and headaches because the automated accounting systems may not know what to do with your extra payment.

Also, if your mortgage servicer does not offer a biweekly program they may require that you set up your payments through a trusted third party service. The drawback here is that you will have to pay a fee to do so. So it is best to check with your mortgage servicer first to see if they offer the program for free or charge a fee before doing it yourself or seeking out an outside firm.

If they do offer a biweekly program, make sure you get something in writing and read the fine print so you understand any fees that will be charged and how your extra payments will be applied to your account. That way you can weigh your options to see which is the best and least expensive route to start paying off your home loan earlier.

Erik Sandstrom
LoanSafe's Mortgage Expert
I'm a Senior Loan Officer and LoanSafe mortgage expert. If you need a live rate quote, or need help getting a new mortgage, please call me direct anytime at 619-379-8999.