A bi-weekly mortgage payment program involves making half the monthly payment every two weeks instead of one full payment per month. Because there are 52 weeks in a year, this produces 26 half-payments, or 13 full monthly equivalents rather than 12. The result is one extra full payment applied to principal each year.
How the Math Works
- ✦Standard schedule: 12 payments per year
- ✦Bi-weekly schedule: 26 half-payments per year, which equals 13 full payments
- ✦One extra payment per year goes entirely to principal reduction
- ✦On a typical 30-year mortgage, bi-weekly payments can cut the loan payoff timeline by 4 to 6 years
- ✦Total interest savings over the life of the loan can be substantial depending on the rate and balance
The Third-Party Service Fee Trap
Many companies and even some lenders offer bi-weekly payment programs for a setup fee plus ongoing monthly charges. These services are unnecessary. The borrower is paying for something they can replicate for free. Simply divide the monthly payment amount by 12 and add that amount as an extra principal payment each month. The result is identical to a true bi-weekly program: one extra full payment per year, no setup fee, no monthly charge.
How to Actually Set This Up
- ✦Contact the servicer directly: some allow bi-weekly drafts at no cost if payments are applied immediately
- ✦If the servicer holds semi-monthly payments until the full amount clears, the interest savings are minimal because the payment is not applied on the 14-day date
- ✦DIY alternative: add 1/12 of the monthly payment to principal each month on the servicer's website
- ✦Confirm with the servicer that extra payments are applied to principal immediately, not held toward future payments
Aria can calculate bi-weekly payment savings on any mortgage balance and rate and show the payoff date comparison. Ask at vicariointel.com.
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