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This simple strategy WILL save you Thousands!


Biweekly mortgage payments are often brought up as a proactive way of saving money and time when a homeowner is trying to pay off their home mortgage sooner. Let’s take a look at how this strategy can help you with a quick example.

This savvy homeowner owes $331,991.60 on their home and they contacted their mortgage company and asked them to place them on a biweekly payment plan. They were placed on hold for 30 minutes but it meant immediate savings! Let’s break down the example: The savvy home owner currently pays $1849.12 a month. The homeowner after the agreement will now pay $924.56 every other week (927.06 as the lender is charging a $2.50 fee for each payment. Don’t let this distract you from your goal we will touch on these fees later on.) Savvy homeowner will end up paying an extra $1849.12 every 12 months. Just one extra payment saves the homeowner in this example a total of $24,386.32 over the life of their loan and it shaves off FOUR years from the 30-year term.

Even though it’s a simple process you can encounter some road blocks. Most lenders will make it tough for you as they won’t just let you set this payment agreement on your own . The lender usually requires you to email them and wait on a call or call and wait on hold in order to process this agreement. In my opinion it’s a form of slowing down your momentum and discouraging home owners from these savings as this minor strategy saves you thousands which means they lose thousands! Do not be discouraged set aside time to make the appropriate calls.

Some of my clients ask: if I’m only splitting my payments in half how am I paying an extra payment each year?

Remember this agreement does not take two exact payments a month it’s taking half of your mortgage every 14 days. By making payments every two weeks, you'll make 26 payments per year rather than 12. While each payment is half the monthly amount, you end up paying an extra month per year because some months are longer than others. That equals 13 monthly payments annually.

Now let’s get into some of those road blocks you may encounter. Some lenders have to grant permission before you can switch to biweekly payments. There are some lenders who require you to have a healthy payment record with them for a determined number of months before they can allow these payments. Other lenders will only allow this agreement if you agree to automatic payment withdrawals. If approved, keep in mind that some lenders charge fees to change payment agreements, while others do not. When you talk to your lender, find out if there are fees associated with making the switch. In the example I provided savvy homeowner was charged a one-time fee of $75.00 and a $2.50 fee per payment. How much is this person paying in fees and does it justify the biweekly strategy ... well, the home owner will make 300 payments in the life of the loan. That is 300 X $2.50 =$750.00 add the one time $75.00 fee and you have a total of $825.00 paid in fees over the lifespan of the 30-year loan. Should you pay $825.00 and save $24,386.32 ...hmmm that is your decision to make but if you ask me, I say YESSS PLEASE!!

If your lender does not agree to the biweekly payment terms that you propose, the simplest way to take advantage of this strategy is to save and make one extra payment every year. When you make any kind of extra payments, always make sure that it is being applied to your principal only and not the interest. It’s important to note that certain mortgages don't allow early payoffs and the whole reason for this strategy is to pay the loan earlier than the original agreement. When early payoffs aren't allowed, lenders may charge fees known as prepayment penalties. These fees may equal the amount of interest you’re eliminating. If you aren't sure if your mortgage allows early payoffs, look over your loan documentation or talk to your lender. Great news is that most mortgages do not mind early payoffs but please make sure you start off with the following question: Do you allow early payoff? If the response is yes, start saving TODAY!


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