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What Is a Biweekly Mortgage?

Learn about biweekly mortgages in this Howcast finance video with expert Gregory McGraime.

Transcript

In most cases with a mortgage what someone is doing is paying a mortgage payment once a month. With biweekly mortgages what you're doing is, instead of paying once a month, you're paying half the amount twice a month or every two weeks.

So let me give you an example of how this works. Let's say my normal mortgage payment is $2,000 every month. With biweekly mortgage payments what I'm doing is I'm paying $1,000 every two weeks. And the reason a lot of people find this to be beneficial is because they get paid every two weeks from their job and it allows them to manage their budgeting much easier than just making one bigger payment once a month.

Now, what's the other benefit of paying biweekly on your mortgage? Technically, you're making a 13th payment each year. The way that works is every two weeks you're paying half the amount, but some months are a little bit longer than four weeks. So at the end of the day if my biweekly payment was $1,000 every two weeks I end up making an extra two payments. So that's great. I'm pre-paying my mortgage earlier, and what that means is that instead of taking me 30 years in most cases to pay off my mortgage I'll be done in approximately 23 years. So I'm saving myself seven years of mortgage payments all for something that's pretty feasible for most people to do. Because you're getting paid again every two weeks and it feels like you're not making any difference in the payment. But really you are.

Now, some lenders will actually charge you to set up biweekly mortgage payments, but you can usually do the same thing on your own. You can accomplish very similar objectives by simply making one extra mortgage payment on your own or by increasing each of your monthly payments by just about 10%. All those are good strategies, and you should really consider trying to pay off your mortgage particularly by the time you retire. Paying biweekly is a great strategy to help you do that.

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