How biweekly payments work
With biweekly payments you pay half your monthly payment every two weeks. There are 52 weeks in a year, so that’s 26 half-payments, the equivalent of 13 monthly payments instead of 12. The extra payment each year goes to principal and shortens the loan.
An example
On a $400,000 loan at 6.5%, paying $1,264 every two weeks instead of $2,528 a month pays the loan off about 5 years and 10 months sooner and saves around $116,000 in interest.
Watch out for fees
Some companies sell biweekly programs that charge setup or transaction fees, and some hold your half-payments until a full payment is collected. You can get exactly the same result for free by adding one-twelfth of your payment to each monthly payment, or by making one extra payment a year.
Is it right for you?
Biweekly payments fit well if you’re paid every two weeks, since the payment matches your paycheck. As with any prepayment, keep an emergency fund first, and confirm with your servicer how partial payments are applied.
Setting it up
If your servicer offers a free biweekly option, it’s the simplest route. Otherwise, set up a recurring extra principal payment each month equal to one-twelfth of your payment. Check your next statements to make sure the extra amount reduced the principal, not just prepaid future interest. Either way, your required payment stays the same, so you can stop if your budget changes.
Questions buyers ask
Do biweekly payments help with PMI?
Yes. Because the balance falls faster, you reach 80% of your home’s original value sooner and can ask your servicer to remove PMI earlier.
How many years do biweekly payments take off a 30-year mortgage?
Usually about four to six years, depending on your rate: the higher the rate, the more the extra payment each year saves. The calculator shows the exact figure for your loan.
How much do biweekly payments save?
On a typical 30-year loan, they cut roughly 4 to 6 years and tens of thousands of dollars in interest, depending on the rate.
Can I just pay extra each month instead?
Yes. Adding one-twelfth of your payment each month has the same effect without a special program.
Does my lender have to accept biweekly payments?
Not all servicers do. Ask how they handle partial payments before you start.