There is often confusion with bi-weekly mortgage plans. Many people hear about them for the first time and assume that all they have to do is pay their mortgage 2 times a month and they will get these incredible savings. The key, however, is in the subtle difference between paying twice a month and paying every two weeks. Confused? Here is a more detailed explanation:
If you make payments twice a month, you would make a total of 24 payments (12 months x 2 payments a month = 24 payments). If you pay every two weeks, however, you’ll make 26 payments (52 weeks divided by 2 = 26 payments) during the year. The huge savings that bi-weekly mortgages provide comes not from paying twice a month, but by making the equivalent of an extra monthly payment each year toward your mortgage.
The beautiful thing about bi-weekly mortgage payments is that you can usually do them yourself with no penalty. Contact your mortgage lender to make sure. Also, be sure that you have other debt paid off first since it usually makes little sense to pay off your mortgage early if you have credit card debt. Want to know how much you can save? We have a new visual bi-weekly mortgage calculator so you can see. Play around with it and I think you’ll be surprised.