How Much Do Biweekly Payments Shorten a 30-Year Mortgage?

by Philippe Lanctot, Demand Media
    Biweekly mortgage payments save interest.

    Biweekly mortgage payments save interest.

    Making biweekly payments to your mortgage can save you thousands of dollars in mortgage interest. Instead of making monthly mortgage payments, you pay every two weeks to coincide with your regular biweekly paycheck. Your payments are more frequent and therefore lower, and paying your mortgage on the same day as you receive your paycheck means you might not miss the funds as much as when you make a larger mortgage payment on the same day once a month.

    How it Works

    The mortgage lender calculates your monthly payment based on your interest rate. You pay that monthly amount divided by two every two weeks. It might feel as though you are paying the same amount every month, but in fact you will be making the equivalent of one extra mortgage payment every year. On a monthly basis you would make 12 payments per year. But since there are 52 weeks in the year, paying every two weeks means you will make 26 payments equal to one half of your monthly mortgage payment, or 13 monthly mortgage payments.

    Advantage

    At the beginning of your mortgage, most money from your payments go to pay interest because the principal is so large. The faster you pay off your principal, the less will go to interest every month. Making biweekly payments will pay more money to your mortgage and reduce your principal and interest faster than a monthly payment. This will result in paying down your mortgage faster. Consider a $300,000 mortgage at a 4 percent interest rate for 30 years. Your monthly payment would be $1,432.25 and your balance would be paid off in 30 years. If you paid biweekly, your payment would be $716.12 ($1,432.25 / 2) every two weeks. Over a single year your monthly payments will total $17,187.00 ($1,432.25 x 12) while your biweekly payments will total $18,619.12 ($716.12 x 26).

    Reduced Interest

    In a single year you will make one extra mortgage payment by making three biweekly payments in two months of the year. By the end of each year your additional payments will reduce your interest charges and therefore reduce your payment period. The $300,000 mortgage at 4 percent for 30 years with monthly payments will have a principal balance of $294,716.89 at the end of the first year. With the extra biweekly payments, that balance would be $293,210.51, or more than $1,500 lower that it would be without the extra payments.

    Shortened Payment Period

    Paying half the monthly mortgage amount every two weeks will reduce your balance and interest charges faster and result in your mortgage being paid off in 25 years and 42 weeks. Your mortgage payment duration would therefore be reduced by more than four years

    About the Author

    Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the "Canadian Insurance Journal" and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.

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