A bi-weekly mortgage is defined as a mortgage which requires 1/2 the normal monthly payment every two weeks. Over the course of the year, 26 half payments are made which is equivalent to 13 full mortgage payments, instead of only 12 payments. As a result of this extra payment the loan amortizes much faster than a loan with normal monthly payments. It’s very simple to set up, especially if you are having payments automatically transferred from you account, and you will see huge benefits over time.
With this technique you’ll save thousand of dollars in interest, and you’ll also save a lot of time. For example, consider a mortgage with a 25 amortization. With normal monthly payments you would pay it off in 25 years. With a bi-weekly mortgage you would pay it off in less than 22 years. That’s over 3 years with no payments! When you’re just starting out it’s sometimes difficult to look that far ahead, especially if money is tight. But if you try to pay off your home as fast as you can, you’ll save a lot of money.
If you choose to take advantage of the benefits, make sure it is the accelerated bi-weekly where you are making a payment every two weeks. If you choose the bi-weekly where payments are made twice per month, you won’t experience the same benefits.
Keep in mind that there are always factors which can influence the life of your mortgage, such as changing interest rates, and whether you opt for a refinance home mortgage before your term is over.
Many people get paid every two weeks which makes a bi-weekly mortgage perfect for them, because then they make a mortgage payment every payday. Once people get used to the payment frequency they won’t notice the extra payments over the course of a year. But they will notice when they pay off their home faster.