If you prefer to save yourself and contribute that extra payment, you don’t have to switch to a bi-weekly subscription. You just need to check your mortgage agreements to make sure you paycheck bi weekly won’t be penalized for paying off the loan early. Since there are 52 weeks in a year, 26 biweekly payments mean you make 13 monthly payments each year instead of the standard 12.
Sarah Sprague Gerber, CFP professional® and founder of Momentum Financial Planning, says biweekly mortgage payments can help you save money on interest and build equity in your home faster. But first, you need to check that your lender allows bi-weekly payments and that the money you pay goes into the principal. The way to do this, according to some lenders, is to pay biweekly mortgage payments instead of monthly payments.
However, any money you save, whether it’s a biweekly program or additional payments on yourself, can be debatable, or your loan terms include a mortgage advance penalty. While most mortgages only require monthly payments, some borrowers choose to make biweekly mortgage payments. Biweekly payments can help you pay off the loan faster and also give you a predictable monthly payment. Many people want to get out of their mortgage in less than 15 or 30 years. A popular strategy to make paying your mortgage early a little easier is to make biweekly payments instead of monthly payments.
But those systems don’t always benefit borrowers as much as they could, because the lender can only apply your payments if you’ve paid enough to make a full monthly payment. You’ll still make additional principal payments, but they only apply twice a year, with your 13th and 26th biweekly payments instead of a smaller amount every two weeks. If you have a monthly mortgage, you’ll need to make 12 payments over the course of a year. If your budget is low on cash, you may find it hard to get the money to make that extra payment each year.
You don’t have to sign up for an official biweekly repayment plan to save money on interest and pay off your loan earlier. You can send extra money to your lender, but make sure it’s clearly marked as an additional payment toward the principal. Your lender’s online payment portal may even allow you to do this automatically if you want to make the same additional principal payment each month. When you make biweekly mortgage payments, you divide your monthly payments in half.