How Bi-Weekly Payments Work
A bi-weekly mortgage payment means making a payment every two weeks instead of once per month. Because there are 52 weeks in a year, a bi-weekly schedule produces 26 half-payments, which equals 13 full monthly payments per year instead of 12. That one extra full payment per year is applied entirely to principal, reducing the balance faster and cutting total interest paid.
How Much Do Bi-Weekly Payments Save?
On a $400,000 mortgage at 7% with a 30-year term, switching to bi-weekly payments saves approximately $67,000 in total interest and shortens the loan by approximately 4.5 years.
A Free Alternative
If your lender charges a fee for a bi-weekly payment program, a free alternative produces the same result: divide your monthly payment by 12 and add that amount to each monthly payment as extra principal. This is mathematically equivalent and requires no enrollment or fees.
Bi-Weekly vs. Extra Monthly Payment
True bi-weekly payments and an equivalent extra monthly principal payment produce essentially the same interest savings, because both result in the equivalent of one extra full payment per year applied to principal.