Most home buyers who purchased a home with a mortage loan follow a monthly payment system. Surprisingly, many home buyers are not aware that there exists a biweekly payment system that can help decrease the total interest paid for a home.
<aside> š” Compared to monthly payments, biweekly payments can help decrease overall interest paid for a home over a mortgageās lifetime
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For a typical monthly payment system, a home buyer submits a mortgage payment once a month; the payment is comprised of the principal and interest based off of the principal.
For biweekly payments, the mortgage payment from the monthly payment system is split in half where each half is paid once every two weeks. Since there are 52 weeks in a year, a biweekly payment plan will incur 26 half payments across the year; this would be the same as 13 whole payments. Hence, the key difference between the monthly and biweekly systems is that the biweekly system allows for an additional payment compared to the monthly system.
By submitting an extra whole payment per year for the biweekly system, the home buyer is able to further decrease their remaining principal for their mortgage, and thus decreasing the interest that they would need to pay for upcoming payments compared to that of the monthly system.
Although biweekly payments seem ideal, there are some drawbacks:
Overall, if a home buyer is financially capable of submitting mortgage payments on a biweekly basis, then a biweekly mortgage system can be useful in decreasing the overall interest that will need to be paid across the mortgageās lifespan.
The ability for home buyers to use biweekly payments can be a factor when shopping between mortgage lenders.
Monthly vs biweekly mortgage payments https://www.chase.com/personal/mortgage/education/financing-a-home/monthly-vs-biweekly-mortgage-payments