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Should I Make Bi-Weekly Mortgage Payments?

Many lenders offer borrowers the option of making either monthly or bi-weekly mortgage payments. Under a bi-weekly mortgage plan, rather than making a full mortgage payment once per month, borrowers pay one-half of that amount every other week.

Since the total amount paid each month is the same, what is the advantage to making bi-weekly mortgage payments? While there are some non-quantitative benefits associated with bi-weekly payments, such as potentially aligning with paycheck schedules and easing monthly cash flow challenges, the primary benefit associated with bi-weekly repayment plans is that they accelerate the repayment of your loan.

Under a monthly payment plan, 12 payments are made each year. A bi-weekly payment plan incorporates a virtually 13th payment each year: 52 weeks divided by 2 (a payment every other week) equals 26 payments; 26 payments divided by 2 equals 13 monthly-equivalent payments.

Accelerating your repayment period will result in you paying off your mortgage earlier, eliminating mortgage payments earlier, and reducing the overall amount of interest you pay over the actual term of the loan.

While most financial advisors see the benefit in this, most also agree that this option only makes sense for borrowers if it comes without any fees or changes from the lending institutions. If fees do exist, borrowers can create the same net effect by adjusting the payments they make on their monthly payment plan. For example, borrowers can add a little bit extra each month, and apply it the mortgage’s principal, or sock-away a bit of money over the course of the year (an amount equivalent to one month’s mortgage payment, perhaps), and apply it to principal on the final payment of the year.

From a pure financial perspective, borrowers can use a calculator like the only below to see the impact of a bi-weekly mortgage on the repayment period of their loan, and the total amount of interest they will pay over the course of this loan:

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