A mortgage on which the borrower pays half the monthly payment every two weeks. Because this results in 26 (rather than 24) payments per year, the biweekly mortgage amortizes before term.Homeowners should beware of third parties who contact them and offer to set up bi-weekly payments. In most cases this can be accomplished by contacting your loan servicer without the need of any third party.
Even if your loan servicer does not offer a bi-weekly mortgage payment program you can still simply make bi-weekly payments on your own and any excess money the servicer receives over and above the interest due will be applied to principal reduction.
Biweekly shortens the time needed to pay off a 30 year mortgage by about 5 years.
One of the problem with biweekly is the fact that the lender withdraws payment every two weeks from my customers' bank accounts, so customers must have at least 3 or 4 payments worth of funds "lying around" in their bank accounts. If they don't have that kind of available money, they would have to take care to have funds for withdrawal. And that's a difficult task because funds are drawn on the day of the week (e.g. every other Friday) rather than the day of the month (such as the 1st of every month).
As a solution, a client can get a "regular" mortgage, and make an extra payment every year. Making that 13th payment achieves the same result as a biweekly, and depending on whether the escrow portion (property tax and hazard insurance) of the monthly payment is included in the extra payment, one can even pay off a 30 year mortgage in 23 years!
An example of the savings of biweekly payments would be as follows:
Mortgage amount: $100,000
Rate: 6%
Term: 30 years
You would make payments of $302.06 every two weeks. You would make 639.2 payments
and cut your term down to 24.52 years saving you $24,405.
A mortgage that you make payments every 2 weeks, instead of monthly. The basic idea is that instead of making 12 monthly payments during the year, you make 13. The extra payment reduces the balance, significantly reducing the time to pay off a 30 year mortgage.
