Biweekly Mortgage Payments: How They Work, Potential Savings, and Key Risks to Avoid

A biweekly mortgage payment plan can help you pay off your home loan years ahead of schedule and save thousands in interest, but it's crucial to understand the risks, particularly fees charged by third-party services. By managing the process yourself or working directly with your lender, you can achieve the same financial benefits without incurring unnecessary costs. The core advantage is making the equivalent of 13 full payments each year instead of 12, which directly reduces your loan principal faster.

What Is a Biweekly Mortgage Payment Program?

A biweekly mortgage payment plan is a scheduling method where you pay half of your monthly mortgage amount every two weeks. Over a year, this results in 26 half-payments, which is mathematically equivalent to 13 full monthly payments. This strategy accelerates equity building and reduces the total interest paid over the life of the loan.

For example, on a 30-year fixed-rate loan of $200,000 with a 4.5% interest rate, the standard monthly principal and interest payment is $1,013.37. By switching to a biweekly plan from the start, you could pay off the loan approximately 4 years and 4 months early and save over $27,000 in interest.

Table: Estimated savings from a biweekly payment plan. Based on our experience assessment, actual figures will vary by loan terms.

What Are the Risks of a Biweekly Payment Program?

The primary risk involves fees, especially when using a third-party service provider instead of your original lender. Some companies charge significant upfront enrollment fees, plus processing fees for each payment. The Consumer Financial Protection Bureau (CFPB), the primary federal regulator for mortgages, has issued warnings about these practices, stating that high fees can eliminate the financial benefits.

It can take a decade or more to recoup these initial costs. If you sell your home or refinance before that point, the fees paid will likely exceed any interest savings. The safest approach is to set up a biweekly plan directly with your mortgage servicer, the company that sends your monthly statements. In most cases, they offer this service with minimal or no fees. Always request a full briefing on their specific terms before enrolling.

How Can You Benefit from Biweekly Payments Without the Risk?

You can achieve identical savings without any risk of third-party fees by managing the process yourself. This DIY approach provides full control and guarantees that every extra dollar goes toward reducing your loan's principal.

There are two simple methods:

1. Make One Extra Payment Per Year: The most straightforward strategy is to make one additional full mortgage payment per year. Using the previous example, you would send a thirteenth payment of $1,013.37 annually, designated entirely for principal reduction. This yields the same early payoff and savings as a formal biweekly plan.
2. Pay Extra Principal Each Month: Divide your monthly payment by 12 and add that amount to each regular payment. For a $1,013.37 payment, this equals an extra $84.45 per month. On your mortgage statement, there is typically a line for "Additional Principal" where you can specify this extra amount.

To implement this strategy effectively, review your mortgage statement or online portal for the "additional principal" payment option. Inform your lender that the extra funds should be applied directly to reducing the loan principal, not toward advancing the next payment's due date. This ensures your strategy works as intended, accelerating your path to being mortgage-free.