Bi-Weekly Mortgage Payments: Pros, Cons and a Simpler Option

Bi-weekly mortgage payments sound almost too simple: pay half your mortgage every two weeks instead of the full amount once a month, and you pay your loan off sooner. There is real arithmetic behind that idea, and there are also catches. I would rather you understand both before you sign up for anything.

The CFPB describes a bi-weekly plan this way: your servicer collects half of your monthly payment every two weeks, which adds up to 26 payments over the course of a year. Twenty-six half-payments equal 13 full payments, so you end up making one extra monthly payment each year.

Here is the math with round numbers. If your monthly payment is $2,000, you would pay $1,000 every two weeks. Over a year that is 26 × $1,000 = $26,000, compared with 12 × $2,000 = $24,000 on a normal monthly schedule. The extra $2,000 is the difference, and it is only helpful if it is applied to your principal.

Do bi-weekly mortgage payments save money?

They can, if the extra payment goes to principal and you do not pay fees that cancel the benefit. I do not quote a dollar figure because it depends on your loan, balance and servicer.

Is bi-weekly the same as every other week?

Yes, in effect. You pay half your monthly payment every two weeks, which is 26 payments a year, or the equivalent of 13 full monthly payments.

Should I pay a company to set up a bi-weekly plan?

I would be careful. The CFPB advises checking for fees, and says you may be able to do the same thing by making an extra monthly payment yourself.

Can I just make one extra payment a year?

Yes, as long as your loan does not carry a prepayment penalty that applies and your servicer applies the extra to principal. Confirm both with your servicer.