The math behind biweekly mortgage payments
It seems simple.
Making extra mortgage payments can save you thousands of dollars in interest payments over the life of your loan. If you make just one full extra payment every year, you can pay off a 30-year fixed loan in as few as 25 years, saving tens of thousands of dollars in interest.
But saving and making that extra payment can get confusing.
That's why many banks and lenders have made it easy by giving homeowners the option to make biweekly payments. My wife and I were given this option when we closed on our new home and were setting up the bank draft for our loan payments.
Biweekly payments essentially create one extra payment per year, yet homeowners may not even realize it.
That's because with biweekly payments, you'll actually pay 26 times a year, or the equivalent of 13 full monthly payments.
There is one potentially budget-busting element to this payment method: Twice a year, you'll make payments three times in one month, a calendar quirk caused by months in which there are five weeks.
You must carefully manage your monthly budget and know when the payments will be withdrawn from your bank account.
The savings you'll realize can make some of the hassle worth it. Avoid the hassle altogether with a little prior planning and determination.
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