Unlocking the Benefits of Biweekly Mortgage Payments

Most homeowners dream of paying off their mortgage early. One effective strategy to achieve this goal is to make biweekly mortgage payments. By paying half your monthly mortgage every other week, you can shave years off your loan and save thousands of dollars in interest. At O1ne Mortgage, we are committed to helping you understand and implement this strategy to maximize your savings. For any mortgage service needs, call us at 213-732-3074.

How Do Biweekly Mortgage Payments Work?

The concept behind biweekly mortgage payments is straightforward: instead of making one full monthly payment, you pay half your monthly mortgage amount every two weeks. This method leverages the calendar to your advantage. There are 52 weeks in a year, and by paying every two weeks, you end up making 26 half-payments, which equates to 13 full monthly payments annually. This extra payment can significantly reduce your principal balance and the interest you pay over the life of the loan.

When you make biweekly mortgage payments, you save money on interest in two ways:

• By making more frequent payments, you reduce your principal balance faster, resulting in less interest accruing.
• By paying off your mortgage sooner, you eliminate several years of interest payments.

Can You Pay Your Mortgage Biweekly?

Before you start making biweekly payments, it’s crucial to check with your lender to ensure they allow this payment method and will credit your payments appropriately. Not all lenders accept biweekly payments, and some may hold partial payments until they receive the full monthly amount, which can negate the interest savings.

Contact your lender to confirm if they accept biweekly payments and if there are any fees for modifying your payment schedule. At O1ne Mortgage, we can help you navigate these details to ensure you maximize your savings. Call us at 213-732-3074 for personalized assistance.

Watch Savings Add Up With Biweekly Payments

Making biweekly payments can significantly reduce the term of your mortgage and save you a substantial amount in interest. For example, if you have a 30-year mortgage of $400,000 with a fixed interest rate of 5%, your monthly payment is $2,147.29. By making biweekly payments of $1,073.64, you could trim nearly five years off your mortgage and save $69,448.03 in interest—all without refinancing.

Michael Hausam, a realtor and mortgage broker, explains, “A biweekly payment plan is far more effective than merely sending one additional payment per year. Your loan balance accrues interest every day, and reducing that principal balance every 14 days saves more in interest charges than one full additional payment every 12 months.”

Lisa Orban, an Illinois-based homeowner, shares her experience: “I pay biweekly because more money is put towards the principal rather than the interest. The payment on the first of the month goes more towards interest, but the payment on the 15th shifts more money towards the principal.”

Should You Pay Your Mortgage Every Two Weeks?

If your goal is to pay off your mortgage sooner and save on interest, biweekly payments can be a solid option. This strategy is particularly beneficial if you have a high interest rate, as it can lead to considerable savings over the life of the loan. Additionally, aligning your mortgage payments with your biweekly paycheck can make budgeting easier.

However, switching to a biweekly payment schedule may not be beneficial if you don’t have a steady income or if your mortgage carries a hefty prepayment penalty. Some lenders impose prepayment penalties that could negate the interest savings from early repayment. Always check your mortgage contract or contact your lender to determine if there are any prepayment penalties.

Alternatives to Biweekly Mortgage Payments

If your lender doesn’t allow biweekly payments, there are still ways to pay off your mortgage early and save money:

Make an Extra Payment Every Year

A biweekly mortgage payment schedule equals one extra payment each year. You can achieve the same result by adding one-twelfth of your usual mortgage payment to your monthly bill or directing tax refunds, bonuses, and other additional money towards your principal balance.

Refinance Your Mortgage

Refinancing your mortgage can give you a shorter repayment term and a lower interest rate. Reducing a 30-year term to 15 or 20 years can save you significantly on interest, although it will increase your monthly payment. Be mindful of closing costs and origination fees, which could offset your interest savings if you move out before reaching the break-even point.

Eliminate PMI

Private mortgage insurance (PMI) can add several hundred dollars to your monthly mortgage payment. You can eliminate PMI on a conventional loan by accruing 20% equity in your property. Once you no longer have to pay PMI, you can direct those funds towards your principal balance to pay off your home loan sooner. Contact your lender to discuss removing your PMI payments.

Create More Room in Your Budget

Look for ways to create extra money in your budget to direct towards your principal mortgage balance. Review your non-essential purchases and consider cutting unnecessary expenses. Additionally, consider ways to increase your income, such as volunteering for overtime at work or asking for a raise.

Improve Your Credit for Greater Financial Strength

Strengthening your credit is another foundational pillar of your financial house. Regularly review your credit report and credit score to maintain a high credit score, which can help you qualify for a refinance or other credit options with favorable rates.

At O1ne Mortgage, we are dedicated to helping you achieve your financial goals. If you have any questions or need assistance with your mortgage, call us at 213-732-3074. Our team of experts is here to guide you every step of the way.