by Starla Ross

Created on: May 12, 2008   Last Updated: January 23, 2009

Changes in the banking and mortgage industry over the last several years have led to the invention of bi-weekly mortgage payments.

Bi-weekly mortgage payments are just as simple as they sound. Instead of paying one full payment once per month, you simply pay one-half of your payment every two weeks, usually through automatic withdrawal with your bank.

Many banks and mortgage lenders have set up such programs which can offer several benefits to you, the borrower.

EASIER BUDGETING

Because one-half of the payment is automatically withdrawn from your checking or savings account every two weeks, it's very possible you can have your mortgage payment taken out on the days you are paid. When your mortgage payment is taken out first, it ensures what is (most probably) your most expensive and valuable asset is taken care of first before your other expenses. There's no late payments, and no late payment fees.

Most banks require bi-weekly payments to be automatically withdrawn from a bank account, which saves time and expense for you because there's no check to write, and no stamps to buy. Making your mortgage payment becomes convenient and easy.

Most banks will not accept partial payments due to legal and bookkeeping issues. Trying to physically send in one-half of your payment every two weeks is usually not acceptable for most lending institutions. The bi-weekly payment plan is a way to get around the partial-payment issue while making your budgeting (and your life) just a little easier.

DECREASED INTEREST PAYMENTS

When you pay one-half of your mortgage payment every two weeks, you will be making 26 half-payments per year (or 13 total mortgage payments). Paying just one extra mortgage payment per year can greatly reduce your principle balance, as well as the amount of interest owed. You may not notice a large difference the first year, but the savings becomes substantial as your mortgage balance goes down.

REDUCED DEBT

Using a bi-weekly mortgage program can reduce your mortgage term as much as six to eight years. That means a 30-year fixed mortgage may be paid off in as little as 22 years, or a 20-year mortgage in as little as 14 to 15 years.

No mortgage payment means more cash in your pocket to do as you like: save for retirement, pay for children's college education, travel, or remodel your home.

To see if a bi-weekly payment schedule may work for your family, simply call your mortgage lender and ask if a bi-weekly plan is available. With the completion of a few pieces of paperwork, your bank can most likely set you up with an automatic plan.

If your mortgage lender does not yet offer a bi-weekly plan, but you would like to accomplish the same task on your own, it is possible, but with a little more work. Simply add one-twelfth additional principle to your mortgage payment each month, or write out one-half of your mortgage payment every two weeks and send those checks with your statement when your mortgage payment is due. (Again, most mortgage lenders do not accept partial payments, so you'll need to wait until you have the entire mortgage payment ready before sending in your payment).

Bi-weekly mortgage payments can be a solution to ensuring your mortgage payment is made on time, simplifying your budget, and helping you get one step closer to achieving your financial goals.

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