Biweekly Mortgage Payments: Do They Really Save Money?
Yes, it works, and the trick is simple. Twenty-six half-payments a year add up to thirteen full ones instead of twelve. On a $320,000 loan at 6.5%, that one extra payment saves $93,073 and finishes the loan 5.8 years early. Never pay a fee for it - you can do exactly the same thing yourself for nothing.
Why it works at all
A month is not four weeks. That dull fact is the entire strategy.
Twelve months contain 26 two-week periods. So paying half your mortgage every two weeks produces thirteen full payments a year while feeling exactly like twelve - the money leaves in the same rhythm as a fortnightly wage.
That thirteenth payment has no interest to cover, because the interest was already paid. All of it comes off the balance.
And a dollar off the balance early is the most valuable kind, because it stops being charged interest for the whole remaining life of the loan.
What it is worth
$320,000 at 6.5% over 30 years. The payment is $2,022.62.
Adding the same amount of extra money each month - $168.55, which is a twelfth of the payment - produces this, from the extra payment calculator:
| Standard | With the extra payment | |
|---|---|---|
| Loan runs for | 360 months | 290 months |
| Total interest | $408,142 | $315,069 |
| Saved | - | $93,073 |
$93,073 and 5.8 years, from a change most budgets barely feel. The extra arrives as two ordinary half-payments in the two months each year that happen to contain three paydays.
Two traps
Paid biweekly plans. Servicers and outside companies sell this arithmetic as a service, with setup fees and per-payment charges.
You are allowed to do addition for free. There is nothing in a paid plan you cannot do yourself, and paying for it eats into the saving above.
The holding account. Some servicers do not apply your first half-payment when it arrives. They hold it until the second half turns up, then apply both together as one ordinary monthly payment.
Money sitting in a holding account earns you nothing. One phone call settles it: “how do you apply partial payments?” If the answer is that they are held, use the monthly method below instead.
How to get it free
Divide your monthly payment by twelve and add that as extra principal each month.
On this loan that is $168.55 a month, and it produces the figures in the table above. No servicer cooperation is needed beyond marking it clearly as principal.
Then check your next statement to be sure the balance moved. Extra money marked wrongly gets treated as an early payment for next month, which achieves nothing.
Or make one extra full payment a year, whenever it suits you. Tax refund season is a common choice. Earlier in the year beats later, because early principal spends more years not being charged interest.
When to skip it
This is a form of paying the mortgage down early, so the prepay or invest question applies.
Leave it for now if:
- You carry higher-rate debt. A card at 22% beats a 6.5% mortgage comfortably.
- Your emergency fund is not filled yet.
- Funding it would mean missing an employer retirement match.
Extra principal is locked inside the walls of your house. Make sure the money’s more urgent jobs are done first.
Model your own loan in the extra payment calculator - it shows exactly what any extra amount buys in years and in interest.
Common questions about mortgage
How do biweekly mortgage payments save money?
You pay half your monthly payment every two weeks. A year holds 26 two-week periods, so you make 26 half-payments - thirteen full payments instead of twelve. The extra one goes entirely against the balance.
How much does it actually save?
On $320,000 at 6.5% over 30 years, the standard schedule costs $408,142 of interest. Adding the equivalent extra payment brings that to $315,069 - a saving of $93,073 - and the loan finishes in 290 months instead of 360.
Should I pay for a biweekly payment plan?
No. Some servicers and outside companies charge setup fees and per-payment charges for this. You can get the whole benefit free by adding a twelfth of your payment as extra principal each month, which is $168.55 on this loan.
Will my lender apply the half-payment straight away?
Often not. Many hold the first half until the second arrives, then apply both as one monthly payment - which removes most of the benefit. Ask how partial payments are handled. If the answer is that they are held, use the monthly method instead.
When should I not do this?
If you have higher-rate debt, if your emergency fund is not filled, or if funding it would mean missing an employer retirement match. Money put into a mortgage is hard to get back out, so the more urgent jobs come first.