Did you know that biweekly (every other week, rather than once a month) mortgage payments will reduce the amount of interest you will pay during the life of your mortgage as well as pay off your loan more quickly? However, you need to be careful, because procedures at some banks can keep this plan from working out for you. Even though you may be diligently making a mortgage payment every 14 days, if you aren’t paying attention, it is possible that you are not getting any further ahead!

This happens because many banks are not interested in helping you pay your mortgage off more quickly, since it results in less income (interest) for them.

If you want to make biweekly mortgage payments, you should pay exactly HALF your monthly payment amount on the same day, every two weeks. For example, if your monthly mortgage payment is $1,000, you would divide this by two and begin to pay $500 every 14 days.

So, lets take a look at some of the ways this can backfire on you.

When “Biweekly” Becomes “Twice-Monthly”
This is of particular concern if your mortgage payment is automatically deducted from your bank account. Sometimes, when banks are asked to change your payment schedule to biweekly, they will set it up for the 1st and the 15th of each month, every month. Since these are not truly “biweekly” payments, they will have no beneficial effect on your mortgage at all. You need to be clear and firm about having your bank accept your payments every 14 days, not twice a month. In this manner, each year you will be two full payments ahead on your mortgage!

Differences in How Biweekly is Calculated
Some banks have their own way of calculating biweekly payments so that it works in their favor instead of yours. Grab a calculator and figure it out for yourself — it’s not difficult. Simply divide your monthly mortgage payment by two. Unfortunately, some banks don’t look at it this way, and they will calculate it in the following manner:

Again, let’s assume that your monthly payment is $1,000. Each year, this adds up to $12,000.Since there are 26 two-week periods in a year, they will divide $12,000 by 26 to arrive at $461.53. Again, not only does this not help you save money on interest or pay your loan back more quickly, but by using this method of calculation  you may actually find yourself in arrears on your mortgage! This is because during most months, you will only be paying $923.06 ($461.53 x 2) instead of your actual minimum payment of $1,000. Suddenly your bank will be able to impose penalty charges for not making your full monthly payment.

So no matter how helpful it appears your bank is being, always do your own calculations and insist that your payments be made exactly every 14 days. Your financial future is at stake so if you stand firm and remain in control, you will reap the benefits.

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