Bi-Weekly Mortgage Payments:
How to Pay-Off Your Mortgage in Less than 30 Years
by Lisa Phillips
May 2007
A Bi-Weekly mortgage essentially means you pay your mortgage
every two weeks instead of once a month. A bi-weekly mortgage
payment plan is a great way to not only increase the equity in your
home, but also pay off your home mortgage approximately 6 to 8
years earlier than the standard 30 years.

How It Works:

This strategy adds one payment more per year to your mortgage
loan, which at first does not seem like much; however, the savings
are substantial over the length of your loan. Making mortgage
payments every two weeks pays off your mortgage in approximately
23 years instead of the standard 30 years.

For example, if your mortgage payment is $1,600 a month, you
might pay $800 every two weeks instead of $1,600 a month,
resulting in 26 payments in a year. If your bi-weekly payment equals
half your monthly payment, this would be equivalent to making 13
monthly payments.

Advantages:

  • Your mortgage payments will be set up electronically to come
    from your bank account every two weeks. You can reduce
    mail delays and will not have to worry about late fees.

  • Your mortgage is paid off 6 to 8 years early.

Disadvantages:

  • The cost of setting up a bi-weekly mortgage can be
    expensive. Your lender or a mortgage servicing company sets
    up the program and charges you an enrollment fee and some
    even charge on every transaction.

  • You need to stay in your home a good length of time for you
    to fully benefit from bi-weekly payments. While the extra
    money you pay towards your mortgage will increase your
    equity, perhaps that money would be better spent going into a
    high interest bearing savings or retirement account.

DIY (Do-It-Yourself)

You do not have to enroll in a formal bi-weekly mortgage program to
reap the benefits of paying your home off early. You can simply pay
an extra one-twelfth of your mortgage payment each month and
designate that amount to go directly towards the principal only and
not the interest.  Use your tax refund or bonus to make one extra
payment each year on your account and make sure the lender
credits that payment directly to your principal.
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