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With a changing economy, a paid off mortgage has replaced the Mercedes Benz as the new status symbol. One way to have that status symbol faster is paying off your mortgage with bi-weekly payments. With bi-weekly payments, the borrower makes a half payment every two weeks instead of making one full payment every month. After one-year the homeowner will have made twenty-six half payments, the equivalent of thirteen full payments.

Not excited about making that one extra payment per year? Wait until you see the advantages.

ADVANTAGE #1: PAYING OFF YOUR MORTGAGE FASTER

Imagine how much better your life would be with no mortgage payment. What would you do with that extra money? How well would you sleep at night? What would you buy? Where would you go? How much could you save for retirement? Paying your mortgage with bi-weekly payments reduces the term of your loan 7-10 years.

ADVANTAGE #2: SAVING THOUSANDS OF DOLLARS IN INTEREST

With a bi-weekly payment schedule, the bank takes the extra payment and applies 100% of it to the principal amount of the loan. Compounding soon begins: the lower the principal, the less interest charged. The less interest charged, the more the principal is reduced. The more the principal is reduced, the less interest charged. You get the point.

ADVANTAGE #3: NO COST

There's no need to refinance. There's no special fee (although some institutions will unnecessarily charge one for automatic set up). Just make a half payment every two weeks.

A common concern among homeowners who get paid monthly or twice monthly is the two months in which three half-payments are made. Taking the monthly mortgage payment, multiplying it by 13, dividing it by 24, and making that payment twice per month solves the problem. Making an extra payment with your income tax return or adding 1/12 to your payment each month produces the same results.

ADVANTAGE #4: BUDGETING EASE

Spread your most expensive bill throughout the entire month. If you get paid every two weeks, making half a mortgage payment every two weeks makes sense. There is no special budgeting needed. There is no grinding it out until the next paycheck. There is no need to budget extra money.

ADVANTAGE # 5: EQUITY ACCUMULATION

The faster the loan balance is paid down, the faster equity accumulates. More equity provides more options: it increases the profit for investment properties or increases available cash for a down payment on a new home if you decide to sell.

As with any financial decision, one must weigh the advantages and disadvantages. The disadvantage of bi-weekly payments is you make one extra house payment per year. The advantages are seven years of freedom, lower total interest paid, ease of implementation, and faster build up of equity.

Learn more about this author, Trent Lorcher.
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