How to Save With Bi-weekly Mortgage Payments

Note: This is a contributed conversation written by Lynn Smythe, the Founder of The Creative Cottage blog. The opinions and text are all mine.

Owning a new home is one of the top American dreams. Instead of paying rent to your landlord, you are building equity in your residence, whether it’s a condo, townhome or a more traditional house with a white picket fence.

Unfortunately, unless you’ve recently won the Lotto, or have a large inheritance or savings to tap into, owning a home also means having a large mortgage to pay off. The first home my ex-husband and bought was a bit of a shocker. I didn’t realize how much interest you end up paying.

Suggestions for Paying Off Mortgage

I’ve read various suggestions on how to pay off your mortgage early including:

Adding a little more to your monthly payment
Make extra payments whenever possible
Make one extra payment every year
Refinance your current mortgage
apply any bonuses, tips, or cash gifts to your mortgage
Cut your expenses and use to difference to pay down your mortgage
Paying your mortgage more often

That last option, paying your mortgage more often than once a month sounded intriguing. After reading an article on CNBC, I was intrigued by the payment option that lets you save tens of thousands in interest payments by switching to a bi-weekly payment option.

You can find various mortgage calculators online, to help you determine how much home you can afford, a monthly payment calculator, the pros and cons of renting vs buying and more.

Investigate all the ways you can possibly pay down your mortgage sooner while saving big on interest. Photo by **Karolina Grabowska** from **Pexels**.

Benefits of Biweekly Mortgage Payments

“Each year has 52 weeks in it, which is 26 bi-weekly periods. People making 26 payments which are half of their regular monthly payment are effectively making a 13th monthly payment which is applied entirely to the principal of the loan. This single extra payment per year builds home equity faster and can end up saving around 5 or 6 years on the life of the loan compared to a normal 30-year amortizing loan.”
MortgageCalculators.info

Freddie Mac mentions how small changes, such as making additional principal payments, refinancing your loan, or following a biweekly mortgage repayment plan will quickly add up. This will give you the ability to pay off your home loan much sooner as you work towards the ultimate goal of being mortgage-free.

Pros and Cons of Biweekly Mortgage Payments

Do your research before switching to a different home mortgage repayment plan as there may be a fee to set up biweekly payments with your mortgage lender.

Biweekly mortgage payment pros include:

Shortens payment terms
Easy to budget
Builds home equity
Encourages budget planning
Save on interest

Biweekly mortgage payment cons include:

May incur enrollment fees
Less time between payments
Possible prepayment penalties
Less money for savings
Less money for other expenses

One option you have is instead of going through the hassle of converting your home loan from monthly to biweekly payments is to simply make one additional payment per year. Or divide that extra payment by 12 (12 months in the year) and add that extra amount to each of your regular monthly payments.

For example, if you were paying $1200 per month, take that extra month’s payment and divide it by 12 to get $100. Then add that extra $100 to each of your monthly payments and you end up paying $1300 per month, equivalent to one extra payment each year.

Congratulations on buying your first home! Photo by **cottonbro** from **Pexels**

Other Handy Online Finance Calculators

Other handy tools to investigate that can help you determine how much house you can afford to buy and more include:

Monthly Payment Calculator
Debt to Income Ratio
Tax Savings Calculator
Interest Only Mortgage Calculator
Minimum Income Requirement

Do you have a favorite online financial tool you like to use? Reach out to info@thecreativecottage.net to share your money-saving tips to possibly feature in a future post on The Creative Cottage blog.