Biweekly vs. Monthly Mortgage Payments: What to Know | Chase (2024)

Buying home is an important milestone and likely the biggest purchase you'll ever make. Because it's such a big part of your and your family's life, it's important to know all the options available when it comes to paying back your mortgage.

This article looks at how mortgage payments work, how to pay your mortgage and the pros and cons of monthly versus biweekly mortgage payments.

How do mortgage payments work?

When you take out a mortgage, you‘re borrowing money to buy or refinance a home. You make regular payments to repay this loan, usually monthly. The amount you borrow is the loan principal.

With each payment you make, you'll be paying off part of the principal amount and part of the interest. The interest is what the lender charges for loaning you money to buy a house.

Depending on the type of mortgage you have, your payments are usually consistent in amount and made monthly. In the beginning, the majority of your payments will be used to pay off the interest on your loan. As this amount reduces, more and more of your payments will start applying to the principal — the actual amount you borrowed. This means that for the first few years of your loan, your payments are focused on paying off interest rather than principal.

If you apply additional payments to your principal to bring the amount down, the interest paid on the balance goes down as well because interest is calculated based on the principal balance. The goal for anyone looking to make additional payments on their mortgage should be paying down as much of the principal as possible.

Monthly mortgage payments

When most people buy homes using mortgage loans, they make monthly payments. This once-a-month option is common, and it's convenient as these payments are made on the same day each month. This makes it easy to keep track of your payment due date.

For even more convenience, many opt for automatic mortgage payments. These make it easy to pay on time and require minimal effort.

Monthly payments make budgeting simple, but it's not always the best choice when it comes to paying down your mortgage faster. Compared to biweekly payments, you'll pay more interest over the life of your home loan. This is true regardless of whether your mortgage rate is low, fixed or adjustable. While making 12 payments per year may be simpler, you may pay more for your house than you have to.

Biweekly mortgage payments

There is an alternative to monthly payments — making half your monthly payment every two weeks. When you make biweekly payments, you could save more money on interest and pay your mortgage down faster than you would by making payments once a month.

When you decide to make biweekly payments instead of monthly payments, you’re using the yearly calendar to your benefit. By making payments every two weeks, you'll make 26 payments per year instead of 12. While each payment is equal to half the monthly amount, you end up paying an extra month per year with this method.

For example, if you pay $1,200 once per month as your entire monthly mortgage payment, you're currently making monthly mortgage payments of $14,400 per year.

When you change to biweekly payments, you'll make payments every two weeks. If you used to pay $1,200 dollars a month, you'll pay $600 every two weeks instead. Because some months are longer than others, you'll end up making an extra mortgage payment each year. That equals 13 monthly payments annually, totaling $15,600.

With an extra payment each year, you can pay your principal down faster than you would with the monthly payment strategy. While you'll be making an extra payment, you likely won’t feel a negative financial impact because the payments will be spread throughout the whole year. While one extra payment every year may not seem like a big deal, when you consider the full mortgage loan term, it has its benefits.

Bonus biweekly benefit

If you're paid weekly or every two weeks, another bonus of choosing biweekly payments is that you'll be paying along with your paycheck. Biweekly mortgage payments can help keep you on track, financially speaking. They can also assist you with sticking to a budget that makes it easier to pay your mortgage down faster.

To see if this option would benefit you, use our extra payments calculator. This will show you how much you could save on interest over the life of your mortgage loan. Simply enter your loan information and see if biweekly payments are a good choice for you. If you've asked yourself, "How do I lower my mortgage payments over the long term," biweekly payments may be the answer.

Drawbacks to biweekly payments

One drawback to biweekly mortgage payments is that some lenders may charge fees to enroll in their biweekly payment plan. When it comes to fees, you should crunch the numbers to confirm you'll still get ahead financially by paying biweekly.

Another factor worth noting is that biweekly payments won't enhance your credit score. While they won't negatively affect your score, the credit bureaus use 30-day time frames when they analyze credit data to set ratings. Therefore, you'll make out the same, credit rating-wise, with monthly or biweekly payments.

How to change to biweekly mortgage payments

Some lenders have to grant permission before you can switch to biweekly payments.If approved, there are two things to keep in mind. First, your biweekly payments won't be applied to your account until you've reached your full monthly payment amount. Also, during your first month of enrollment, you’ll likely need to pay both your regular monthly payment plus your two half payments.

Some lenders charge fees to change payment agreements, while others do not. When you talk to your lender, find out if fees are associated with making the switch.

If your lender does not agree to the biweekly payment terms that you propose, simply pay extra every month to get the same benefits. You can also save up and make an extra payment every year, rather than every month. When you make any kind of extra mortgage payment, make sure it's being applied to your loan principal rather than the interest.

It’s important to note that certain mortgages don't permit early payoffs. When early payoffs aren't allowed, lenders may charge fees known as prepayment penalties. These fees may equal the amount of interest you’re eliminating. If you aren't sure if your mortgage allows early payoffs, look over your contract or talk to your lender.

Which payment option is right for me?

Some homeowners who switch to biweekly payments save a significant amount on the cost of their mortgage loans while others don't save that much. How this type of payment schedule will work out depends on a variety of factors, including the terms of your mortgage loan and fees for switching to biweekly payments.

When you’re ready to talk about mortgage payment options and how they might be able to help you reduce the amount of interest you pay over the life of your loan, connect with our team of home lending advisors.

Biweekly vs. Monthly Mortgage Payments: What to Know | Chase (2024)

FAQs

Biweekly vs. Monthly Mortgage Payments: What to Know | Chase? ›

When you decide to make biweekly payments instead of monthly payments, you're using the yearly calendar to your benefit. By making payments every two weeks, you'll make 26 payments per year instead of 12. While each payment is equal to half the monthly amount, you end up paying an extra month per year with this method.

Is it better to pay a mortgage monthly or biweekly? ›

With biweekly payments, you reduce your total interest by quite a bit in the long run. On a $400,000 loan with a 6.5% rate, you'd save over $121,000 by making payments biweekly instead of monthly.

How much faster do you pay off a 30 year mortgage with biweekly payments? ›

Here are some things that a bi-weekly mortgage schedule can do: Equity will build in the home more quickly. The mortgage will be paid off faster. A 30-yar mortgage can be paid off in about 22 years.

What is the advantage to a borrower if he chooses to make biweekly mortgage payments instead of monthly payments? ›

Making biweekly mortgage payments can save you money and help you pay off your mortgage sooner. Before committing to biweekly payments, confirm with your mortgage lender or servicer that it is applying the extra payments to the principal and that there isn't a prepayment penalty.

Is it better to pay extra on principal, weekly or monthly? ›

Since your interest is calculated on your remaining loan balance, making additional principal payments every month will significantly reduce your interest payments over the life of the loan. By paying more principal each month, you incrementally lower the principal balance and interest charged on it.

What happens if I pay an extra $2000 a month on my mortgage? ›

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

How do I pay off a 30 year mortgage in 15 years? ›

Options to pay off your mortgage faster include:

Pay extra each month. Bi-weekly payments instead of monthly payments. Making one additional monthly payment each year. Refinance with a shorter-term mortgage.

What happens if I make 2 extra mortgage payments a year on a 30-year mortgage? ›

Even one or two extra mortgage payments a year can help you make a much larger dent in your mortgage debt. This not only means you'll get rid of your mortgage faster; it also means you'll get rid of your mortgage more cheaply. A shorter loan = fewer payments = fewer interest fees.

What happens if I pay my mortgage every two weeks? ›

A biweekly mortgage means that the borrower is paying every two weeks, or 26 half payments. The result is effectively 13 full payments over a 12-month period, accelerating the payoff of the loan. The extra payment per year can provide significant savings in total interest over the life of the loan.

What is the primary benefit of choosing biweekly mortgage payments? ›

You'll save money in interest

By the end of the loan, nearly your entire mortgage payment goes toward the principal. If you make biweekly payments, that extra annual payment goes entirely toward the principal. This means that there is less money in the loan to charge interest.

Does paying half a mortgage twice a month help? ›

Biweekly mortgage payments result in one extra loan payment each year. As a result, you can significantly accelerate your mortgage payoff timeline and save thousands of dollars in interest by switching to a biweekly mortgage payment plan.

Does paying twice a month reduce interest? ›

Both twice-monthly and biweekly payments generally do not alter the amount of mortgage interest you can deduct from your taxes. However, since biweekly payments result in an extra payment each year, you may pay more of your loan's principal earlier, which could slightly decrease your interest deduction over time.

How to pay off a mortgage quickly? ›

Tips to pay off mortgage early
  1. Refinance your mortgage. ...
  2. Make extra mortgage payments. ...
  3. Make one extra mortgage payment each year. ...
  4. Round up your mortgage payments. ...
  5. Try the dollar-a-month plan. ...
  6. Use unexpected income. ...
  7. Benefits of paying mortgage off early.

What happens if I pay $500 extra a month on my mortgage? ›

Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment. These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only.

What happens if I pay an extra $100 a month on my mortgage principal? ›

If you pay $100 extra each month towards principal, you can cut your loan term by more than 4.5 years and reduce the interest paid by more than $26,500. If you pay $200 extra a month towards principal, you can cut your loan term by more than 8 years and reduce the interest paid by more than $44,000.

How to pay off a 250k mortgage in 5 years? ›

There are some easy steps to follow to make your mortgage disappear in five years or so.
  1. Setting a Target Date. ...
  2. Making a Higher Down Payment. ...
  3. Choosing a Shorter Home Loan Term. ...
  4. Making Larger or More Frequent Payments. ...
  5. Spending Less on Other Things. ...
  6. Increasing Income.

How do biweekly payments affect mortgage? ›

A biweekly mortgage means that the borrower is paying every two weeks, or 26 half payments. The result is effectively 13 full payments over a 12-month period, accelerating the payoff of the loan. The extra payment per year can provide significant savings in total interest over the life of the loan.

Is it better to overpay mortgage weekly or monthly? ›

The main advantage of regular monthly overpayments is that it's more predictable. In fact, you can simply factor in the extra cost to your monthly budget. If you decide you can't afford your overpayments, you can reduce or stop them at any time and go back to your original monthly mortgage repayment.

How much do you save paying your mortgage biweekly? ›

Pro 1: Pay Off Your Mortgage Faster

But if you make biweekly mortgage payments, you will be making what equates to 13 monthly payments each year. Assuming a 6.5% interest rate and biweekly payments of $252, you would pay off your mortgage in a little over 24 years, or about six years early.

What happens if I pay two extra mortgage payments a year? ›

Even one or two extra mortgage payments a year can help you make a much larger dent in your mortgage debt. This not only means you'll get rid of your mortgage faster; it also means you'll get rid of your mortgage more cheaply. A shorter loan = fewer payments = fewer interest fees.

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