Should You Pay Your Mortgage Biweekly?

Team Simplist
Should You Pay Your Mortgage Biweekly?
Nov 16, 2021

What are the advantages and disadvantages of paying off your mortgage biweekly, and how do you determine if it’s right for you?

The dream of living debt-free in a fully paid off home is one shared by many Americans, and it’s often seen as a light at the end of the tunnel after years of faithfully making on-time mortgage payments. While that is the case for many, some people are able to expedite the process using biweekly mortgage payments. How do you know if this strategy will work for you or if you would even be allowed to change the terms of amortization in this way? The answer depends in part on your level of motivation and your financial situation, as well as your lender’s policies. Let’s take a closer look:

Why pay your mortgage biweekly?

Simply put, making a half payment every two weeks—instead of one full payment each calendar month—allows you to squeeze in an extra payment each year. For example, over the life of a 30-year mortgage, you build equity faster and reduce your loan’s amortization timetable, enabling you to pay off your 30-year loan between 3 and 6 years faster!

For those who are looking to build equity faster in a way that is affordable and manageable, biweekly payments can certainly be a great choice. This strategy is especially advantageous for those whose paychecks are distributed biweekly, allowing them to take a half-payment out of each check on a consistent basis and easily manage the accelerated mortgage payment.

Are you allowed to make biweekly payments?

You’ll need to speak with your financial institution to determine their policy regarding biweekly payments. We recommend confirming if your institution:

  • Allows for a biweekly payment plan - many lenders do not allow it.
  • Charges a pre-payment penalty for biweekly payments resulting in an early loan payoff
  • Charges a fee to set up a biweekly payment plan, and the frequency of that fee
  • Automatically applies the additional payments to principal
  • Requires automatic payments to facilitate biweekly payments

The specific rules and processes to set up the biweekly payments vary between lenders. Note that you will likely enter an agreement with a third party company, as most lenders do not have the infrastructure in place to handle biweekly payments. These third parties will be in charge of keeping your payments organized and could introduce a layer of complexity should any issues arise.

Are there drawbacks to biweekly mortgage payments?

While making a biweekly payment may sound appealing, it can be difficult in practice. Here are some things to consider before jumping into a new payment schedule:

  • If you already feel overextended financially, biweekly payments will take an extra chunk of change out of your annual budget. This may not be a good move if you feel like you’re struggling to make ends meet each month.
  • If you struggle with unpredictable income due to seasonal work schedules or an inconsistent income pattern, you may not want to take on an extra mortgage payment each year.
  • Your bank may levy excessive fees or early payoff penalties in order to set up and manage your biweekly payments. You’ll need to carefully examine any fees they charge to ensure that they do not negate the projected savings of an early payoff.

Are there alternatives to biweekly mortgage payments?

A biweekly payment is a structured way of creating an additional monthly payment in a year. If you don't want to commit to that kind of a schedule, you can either add 1/12th of your mortgage payment to each month's payment or simply pay a mortgage payment twice in a given month. Just be sure to check that your pre-payments are being applied to your principal balance.

If you’re unsure where to find extra money in your budget to apply to an early payoff? Here are a few ideas:

  • Designate funds from bonuses, raises, gifts, tax rebates or any other financial windfalls to be applied to the principal on your loan.
  • Planning to give up a bad habit like smoking or fast food? Put the money you save into a savings account and use it to make regular principal payments.
  • Unable to get away for a vacation this year? Apply the money you would have spent on travel to your loan’s principal instead.
  • Finished paying off your car? Don’t rush right out and buy a new one if not strictly necessary. Take a few months to apply that monthly payment as an extra principal payment on your mortgage.

Have questions on your payment schedule? We’re here to help. Whether you are ready to buy or are a current homeowner thinking about how to optimize the equity in your home, Simplist has a wide array of loan options to ensure you identify the best fit for your particular financial situation. Better yet, our friendly loan experts are committed to serving as a guiding light in your homeownership journey—no pushy sales calls, and no jargon. Schedule a call today and find out just how painless the process can be!

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