Are Bi-Weekly Payments Really Worth It?

Many banks offer the convenience of making bi weekly payments. This method allows the borrower to make half payments every two weeks. However, this could be more costly than it’s worth. Typically on a 30 year fixed mortgage, you can pay off your home up to five years early. This is how it works. Since you are paying half mortgage payments you are making 13 payments a year. You are making one extra payment per year. Now let’s do the math. One bank I know charges $250.00 to enroll in its bi-weekly program. Then they charge a transaction fee of $10.00 on every payment. The first year the bank is making an additional $370.00 on top of the interest you are already paying them. You can have the same effect on your mortgage if you divide your principle and interest payment by 12 and add that to your monthly payment. You can do that for free! For example, if you monthly principle and interest payment is $1200.00, just add $100.00 to your monthly payment! One last piece of advice; be sure to tell the bank that you want the extra $100.00 to be paid toward your principle and not toward your next payment. Banks often hold overages instead of applying them to your principle balance.