Does It Improve Credit Rating?

Does It Reduce the Interest?

How Does the Math Work?

What's the Downside?

Is Making Biweekly Mortgage Payments an Excellent 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 standard mortgage who makes monthly payments on your home, you might have found out about biweekly mortgage payments as an option to conventional payment plans. The logic is that increasing the frequency of the payments minimizes the interest that develops up and, over the course of a 30- or 15-year mortgage, that can equal years of payments removed from your loan. However, biweekly mortgage payment programs typically bring extra costs and require accepting a bigger payment amount.

Before you register for biweekly payments, it 'd be wise to weigh the advantages and drawbacks of this type of program to figure out whether it will really conserve you any cash.

- Some biweekly payment programs offered by lending institutions are not the very best financial option for the property owner.
- Committing to biweekly mortgage payments can be hard on a tight budget.
- Biweekly mortgage payments won't always improve your credit report.
- Making additional payments towards the principal of your mortgage is a way 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 certain your mortgage doesn't included an early prepayment charge. That will harm any technique for paying off the loan early.

milan2099/ Getty Images

Will Switching to Biweekly Payments Boost My Credit Rating?

Using a biweekly payment schedule set up by your mortgage lending institution puts you on an automatic withdrawal plan that ensures that your payments are made on time.

If you're the kind of person who misses payments from time to time since you forgot to compose the check, an automatic payment schedule will enhance your credit because your payments will be on time. However, you can get the exact same advantage with an automated regular monthly payment.

Will Biweekly Payments Reduce the Interest I Pay?

The concept that biweekly payments will lower your interest payments might be a myth. Why? Because, depending upon the particulars of your loan, there is an excellent chance that the business receiving your mortgage payment isn't the company that holds the loan.

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

But will you still be minimizing the interest that is developing gradually? Yes. Remember that each fiscal year has 52 weeks. If each month has 4 weeks that equals 48 weeks. So, biweekly payments do not include 2 payments each month however rather include up to 26 half payments-the equivalent of 13 month-to-month payments in a year.

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

How Does the Math Work on Biweekly Mortgage Payments?

It works like this: Biweekly payments are equal to 13 month-to-month 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 additional principal, which shaves six to 8 years off the life of the loan gradually.

But do you have to make biweekly payments to do that? Instead, you could divide the overall of one month's payment by 12 and add that total up to your monthly mortgage payment.

If you're paying $1,500 each month, divide 1,500 by 12 and make your regular monthly payment $1,625. Speak to your mortgage business initially to make sure there isn't something more you have to do to make sure the additional money is used to the primary amount of your loan.

What's Wrong with Biweekly Mortgage Payments?

There are potentially two problems with going with a loan provider's biweekly payment program:

- There are often costs connected to this payment plan. That eats into the amount you're conserving by accelerating your payment schedule.

- You may, like many American consumers, currently have adequate contractual payment obligations in your life. Unless you have substantial monetary reserves, you might wish to keep some flexibility in your budget plan rather than devoting to biweekly payments.

Remember, you can constantly make an additional payment when you get 3 paychecks in a month, get a tax refund, or enter into 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 consist of:

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

- Building equity in your home quicker.


What Are the Downsides of Biweekly Mortgage Payments?

Signing a formal contract to make biweekly mortgage payments has a number of prospective downsides:

- There are frequently fees included and they will eat into the amount you're saving by increasing your annual mortgage payment.

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


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

You can settle your mortgage earlier and reduce your interest expenses without committing to a biweekly mortgage payment. For instance, you can use a bonus offer or an unanticipated windfall to pay off a piece of your mortgage. If you get a tax refund, put the cash versus your mortgage.

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

There are ways to pay down a mortgage without registering for a plan that may include costs connected. The benefits might not exceed the gains of a biweekly mortgage.