Does It Improve Credit Report?

Does It Reduce the Interest?

How Does the Math Work?

What's the Downside?

Is Making Biweekly Mortgage Payments a Good Idea?

Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and assists develop content techniques.

If you are a homeowner with a conventional mortgage who makes monthly payments on your home, you might have found out about biweekly mortgage payments as an alternative to traditional payment strategies. The logic is that increasing the frequency of the payments lowers the interest that develops and, throughout a 30- or 15-year mortgage, that can equal years of payments eliminated from your loan. However, biweekly mortgage payment programs generally bring additional charges and require consenting to a larger payment quantity.

Before you sign up for biweekly payments, it 'd be sensible to weigh the benefits and disadvantages of this kind of program to figure out whether it will in fact save you any cash.

- Some biweekly payment programs used by lending institutions are not the finest monetary choice for the house owner.
- Committing to biweekly mortgage payments can be tough on a tight budget.
- Biweekly mortgage payments will not necessarily enhance your credit rating.
- Making extra payments towards the principal of your mortgage is a method to minimize your interest payments over the life of the loan. You do not need an official contract to do this.
- In any case, make sure your mortgage doesn't featured an early prepayment charge. That will harm any method for settling the loan early.

milan2099/ Getty Images

Will Switching to Biweekly Payments Boost My Credit Report?

Using a biweekly payment schedule established by your mortgage lending institution puts you on an automated withdrawal plan that assures that your payments are made on time.

If you're the type of person who misses out on payments from time to time due to the fact that you forgot to compose the check, an automatic payment schedule will enhance your credit since your payments will be on time. However, you can get the very same advantage with an automated monthly payment.

Will Biweekly Payments Reduce the Interest I Pay?

The idea that biweekly payments will lower your interest payments may be a misconception. Why? Because, depending on the details of your loan, there is a likelihood that the company getting your mortgage payment isn't the company that holds the loan.

Although you're paying two times per month, the servicer receiving your payment isn't making biweekly payments to the company that owns your loan. It's most likely that they're most likely holding the payment in an account until completion of the month.

But will you still be reducing the interest that is developing over time? Yes. Keep in mind that each calendar year has 52 weeks. If monthly has four weeks that equates to 48 weeks. So, biweekly payments do not consist of two payments every month however rather amount to 26 half payments-the equivalent of 13 monthly payments in a year.

Some mortgage business don't accept biweekly payments on mortgages, so you should ask ahead of time before signing up for a biweekly payment plan through a third-party lender.

How Does the Math Deal With Biweekly Mortgage Payments?

It works like this: Biweekly payments are equal to 13 monthly payments in a year, while traditional regular monthly payments amount to 12 payments each year.

By paying an additional month every year, you're paying extra principal, which shaves 6 to 8 years off the life of the loan over time.

But do you need to make biweekly payments to do that? Instead, you might divide the total of one month's payment by 12 and include that amount to your monthly mortgage payment.

If you're paying $1,500 per month, divide 1,500 by 12 and make your month-to-month payment $1,625. Talk to your mortgage business initially to make certain there isn't something more you have to do to make sure the additional money is applied to the primary amount of your loan.

What's Wrong with Biweekly Mortgage Payments?

There are potentially 2 problems with opting for a lending institution's biweekly payment program:

- There are frequently charges connected to this payment strategy. That eats into the quantity you're conserving by accelerating your repayment schedule.

- You may, like most American consumers, already have adequate legal payment commitments in your life. Unless you have substantial financial reserves, you might want to keep some flexibility in your budget rather than dedicating to biweekly payments.

Remember, you can always make an additional payment when you get three paychecks in a month, get a tax refund, or enter a windfall. You don't need to contractually obligate yourself to do it monthly.

Why Are Biweekly Mortgage Payments a Good Idea?

There are a number of benefits to biweekly mortgage payments. They include:

- Settling your mortgage faster, and paying less interest over the life of the loan.

- Building equity in your house much faster.


What Are the Downsides of Biweekly Mortgage Payments?

Signing an official agreement to make biweekly mortgage payments has a number of possible drawbacks:

- There are frequently charges involved and they will eat into the amount you're saving by increasing your yearly mortgage payment.

- You're locking yourself into a commitment to pay a bigger amount every year. If your budget takes a hit from another direction, you might be sorry for that.


What Are Other Ways I Can Pay For My Mortgage Faster and Cheaper?

You can settle your mortgage earlier and minimize your interest costs without devoting to a biweekly mortgage payment. For instance, you can use a perk or an unanticipated windfall to settle a chunk of your mortgage. If you get a tax refund, put the cash against your mortgage.

Whatever you do, make sure that you contact your mortgage holder beforehand and ensure that your additional payment will be used versus the principal of your mortgage loan.

There are methods to pay for a mortgage without signing up for a strategy that may feature charges connected. The advantages may not exceed the gains of a biweekly mortgage.