Monthly vs biweekly mortgage payments

Quick insights

Buying a home is an important milestone and likely the biggest purchase you’ll ever make. Because it’s such a big part of your life, it’s important to know all the options available when it comes to paying back your mortgage. This article looks at how mortgage payments work, how to pay your mortgage and the pros and cons of monthly versus biweekly mortgage payments.

How do mortgage payments work?

When you take out a mortgage, you’re borrowing money to buy or refinance a home. You make regular payments to repay this loan, usually monthly. The amount you borrow is the loan principal. With each payment, you’ll be paying off part of the principal amount and part of the interest. The interest is what the lender charges for loaning you money to buy a house.

Depending on the type of mortgage you have, your payments are usually consistent in amount and made monthly. In the beginning, the majority of your payments will be used to pay off the interest on your loan. As this amount reduces, more and more of your payments will start applying to the principal—the actual amount you borrowed. This means that for the first few years of your loan, your payments are focused on paying off interest rather than principal.

If you apply additional payments to your principal to bring the amount down, the interest paid on the balance goes down as well because interest is calculated based on the principal balance. The goal for anyone looking to make additional payments on their mortgage should be paying down as much of the principal as possible.

Monthly mortgage payments

When most people buy homes using mortgage loans, they make monthly payments. Payments are due on the first of the month, and lenders will offer a grace period up until the 15th to receive the payment. For even more convenience, you might consider automatic mortgage payments. If offered by your lender, automatic payments can help ensure your mortgage is paid on time each month.

Monthly payments might make budgeting simple, but it wouldn’t exactly pay down your mortgage faster, regardless of whether your rate is low, fixed or adjustable. While making 12 payments per year may be simpler, you will pay a certain amount in interest.

Biweekly mortgage payments 

This is an optional alternative to monthly payments—making half your monthly payment every two weeks. When you make biweekly payments, you could save more money on interest and pay your mortgage down faster than you would by making payments once a month.

When you make biweekly payments instead of monthly payments, you’re using the yearly calendar to your benefit. By making payments every two weeks, you’ll make 26 half payments per year instead of 12 full payments. If each payment is equal to half the monthly amount, you end up paying an extra month per year with this method.

For example, if you pay $1,200 once per month as your entire monthly mortgage payment, you’re currently making monthly mortgage payments of $14,400 per year. If you make payments every two weeks, you’d pay $600 every two weeks instead. This equals 13 monthly payments annually, totaling $15,600.

Biweekly mortgage payment benefits

With an extra payment each year, you can pay your principal down faster than you would paying monthly. While one extra payment every year may not seem like a big deal, when you consider the full mortgage loan term, it has its benefits. If you’re paid weekly or every two weeks, an advantage of biweekly payments is that you’ll be paying your mortgage alongside with your paycheck. In this situation, biweekly mortgage payments may help you budget more easily as you pay your mortgage down faster.

To see if this option would benefit you, use our extra payments calculator. This will show you how much you could save on interest over the life of your mortgage loan. Simply enter your loan information and see if biweekly payments are a good choice for you. If you’ve asked yourself, “How do I lower my mortgage payments over the long term,” biweekly payments may be the answer.

Drawbacks to biweekly payments

One drawback to biweekly mortgage payments is that some lenders may charge fees to enroll in their biweekly payment plan. When it comes to fees, you should crunch the numbers to confirm you’ll still get ahead financially by paying biweekly. At Chase, we offer customers the opportunity to engage in biweekly payments without fees.

How to change to biweekly mortgage payments

You may need your lender’s permission before you can begin making payments twice a month instead of once. You should consult your lender on payment options; not all lenders offer biweekly payment programs. Some lenders charge fees to change payment agreements. When you talk to your lender, find out if fees are associated with making the switch.

What to do if you can’t change to biweekly mortgage payments

If your lender does not agree to the biweekly payment terms that you propose, you may be able to pay extra every month to get similar benefits. You can also save up and make an extra payment every year, rather than every month. When you make any kind of extra mortgage payment, make sure it’s applied to your loan principal rather than the interest.

In conclusion

Some homeowners who switch to biweekly payments save a significant amount on the cost of their mortgage loans while others don’t save that much. How this type of payment schedule will work out depends on a variety of factors, including the terms of your mortgage loan and fees for switching to biweekly payments. Before switching to biweekly payments, check with your lender about fees, how payments are applied, and any prepayment penalties. You can often achieve similar benefits by making one extra payment per year or by manually paying extra toward your principal.

When you’re ready to talk about mortgage payment options and how they might be able to help you reduce the amount of interest you pay over the life of your loan, connect with our team of home lending advisors.