Will Bi-Weekly Payments Actually Save You Money?

A question borrowers often ask is whether it’s worth it to make bi-weekly payments on their mortgage. Will it really save you money?

The idea behind making bi-weekly mortgage payments is that since most people are paid every 2 weeks, you allocate half of your monthly mortgage payment to each paycheck. The savings could be big: a $350,000 loan at 6% interest, 30 year term, the PI (principal + interest) payment is about $2,100. If you were to make two bi-weekly payments of $1,050 you would save $80,000 in interest over the course of the loan, and the loan would be paid off in just over 23 years.

So what are the disadvantages? Unfortunately, many lenders will either not allocate your middle of the month payment properly, or once you enroll in the bi-weekly payment plan, you may be stuck with it for the life of the loan.

A better option for most borrowers is to allocate additional dollars, as your budget allows each month, to your monthly mortgage payment. The additional funds will be allocated to pay down the principal balance. Since the amount you allocate will likely fluctuate throughout the year, or even be $0 some months, it provides much more flexibility while still saving you money on interest over the life of the loan.