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Brittany Anderson and her husband had a goal: pay off their mortgage before she turned 30.
Their other trick? They paid their mortgage every two weeks, instead of every month.
Afterward, Anderson posted about the value of making biweekly mortgage payments on TikTok — and the video has nearly 2 million views. There are a lot of people interested in learning how to pay off their mortgages early.
Let’s look at how much you can save by making biweekly mortgage payments — and what you need to be aware of beforehand.
Why Switch to Biweekly Payments?
Anderson says biweekly payments were an easy way to pay off their debt faster.
With this strategy, you’ll divide your monthly mortgage payment by two and pay that amount every two weeks. By the end of the year, you’ll have made 26 payments — equivalent to a full extra monthly payment. “But you don’t notice it as much,” Anderson says.
Always talk with your loan servicer before making biweekly payments, otherwise it could cause issues and you could miss out on the savings.
Depending on your loan term or interest rate, biweekly payments can add up to significant savings over the life of the loan and shave years off of your mortgage repayment term. Here’s approximately what you’d save with biweekly payments on mortgages with various terms and principal balances of $350,000.
|Loan Term||Starting Loan Balance||Interest Rate||Biweekly Payment||Extra Paid Annually||Total Interest Savings||Mortgage Paid Off|
|30 Years||$350,000||3.2%||$757||$1,514||$26,787||44 Months Early|
|15 Years||$350,000||2.75%||$1,188||$2,375||$7,877||17 Months Early|
You’ll save more by making biweekly payments on loans with longer terms, higher mortgage rate, or balance. But even on smaller short term loans, biweekly payments can be a good trick to pay less interest.
Pros and Cons of Biweekly Payments
Making biweekly payments is a great way to prepay your mortgage, which can reduce the interest you’ll pay over the life of the loan and pay off your loan faster. But you need to set up the payments beforehand, and not every loan servicer will offer this option.
Pros to biweekly payments
- Pay less interest
- Pay off loan more quickly
- Easier on your monthly budget than paying a large lump sum
- Build equity faster
Cons to biweekly payments
- Not offered by every loan servicer
- Need to make sure it’s going toward your principal balance
- Lender may charge fees for the service
- Lender may apply the payment only once per month
How to Set Up a Biweekly Mortgage Payment Plan
This biweekly mortgage payment hack can be an excellent way to save money on interest and pay down your mortgage faster. Before you decide to do it, talk to your lender. “For us, it was something that our mortgage lender actually offered,” Anderson says. “It was super simple to set up, and we just clicked the biweekly button.”
But making biweekly payments isn’t an option with every lender.
Setting up everything correctly with your loan servicer will help you avoid headaches down the road, says Jennifer Beeston, mortgage-industry veteran and educator. “If you want to pay down your mortgage more, great, just make sure that your mortgage servicer is aware,” she says.
Kathleen Wernli, 46, of Sacramento, California, and her husband ran into problems when making an extra payment on their mortgage. In between two full monthly mortgage payments they made an additional payment for half of the normal monthly amount. The half payment caused their loan servicer’s system to automatically flag her account with an “adjusted forbearance suspense.”
Every loan servicer has a different process for handling extra mortgage payments or split payments. While some lenders accept partial payments, others might automatically put them in a suspense account (sometimes referred to as an unapplied funds account) until you provide the rest of the payment.
If you aren’t aware of what’s going on and don’t communicate with your lender about why you’re making a half payment, it could consider the payment to be late, which could incur fees and impact your credit. “You really have to talk to your mortgage servicer,” Beeston says. “You don’t know what the triggers in their systems are, and every lender could be different.”
For Wernly, she didn’t even know there was a problem at first. “I didn’t find out about the issue until we were in the process of purchasing a rental home and doing a refinance on our primary residence,” Wernli says. Wernli’s credit wasn’t impacted because her payments were up to date. But the flag on her account caused a significant delay in the mortgage underwriting process because it had to be cleared up before she could move forward with the new loan.
Part of the issue for Wernli was she had made extra payments on a different mortgage and had no issues at all. “We did the same thing [extra partial payments] with another rental home and now we’re ahead a whole payment,” Wernli says. So you need to always ask how these payments will be handled and clear it with your lender.
It’s important to understand the difference between bimonthly and biweekly payments. With biweekly payments, you could pay off a 30-year loan four to five years early because you’re making an extra full payment each year. But bimonthly payments may cut only one or two months off a 30-year mortgage. This is because the interest savings from paying half of your monthly payment two weeks early is minimal and you’re only making 24 half payments in a year, not 26.