Will Bi-Weekly Mortgage Payments Save You Money?

The short answer, yes. Making bi-weekly payments on your mortgage will absolutely cut your interest costs and shorten the length of time it takes to pay off your mortgage. But accelerated bi-weekly payments can significantly reduce costs even more.

How does it all work? There are 12 months per year and 26 two week periods per year. This means with bi-weekly payments, you are essentially making 13 monthly payments per year. Bi-weekly is not to be confused with semi-monthly, which at two payments per months, works out to 24 payments per year.

The difference between bi-weekly and accelerated bi-weekly are as follows. Bi-weekly is a monthly payment times 12 months then divided by 26. Accelerated bi-weekly is a monthly payment divided in half times 26 payments.

Here is an example based on $220,000 mortgage with an interest rate of 3.6%

Monthly            Bi-Weekly        Accelerated Bi-Weekly

Payment                                   $1,110. 04           $511. 92                          $555. 02

Yearly Payment                        $13,320. 48         $13,309. 92                  $14,430. 52

Actual Ammortization              25 Years          24.8 Years                   22.1 Years

Period

Total Interest Paid                    $113,001. 00       $112,743. 00                   $97,887. 00

Interest Savings Over                N/A                 $268. 16                          $15,124. 23

Life of Mortgage

As you can see, with only a small adjustment to you bi-weekly payment, your overall savings are drastic in the long run. You save money by paying less interest on your mortgage, reduce the amortization period and decrease the principle balance that much faster.

If you have any questions on how one of these items may affect you, please call us. It is important to get it right!

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