If I pay half of my mortage payments twice a month will I receive the same benefits as biweekly payments?

Answer 1

You're better off to pay biweekly than twice a month. Twice a month will total 24 payments a year, While bi-weekly will total 26 payments. At year end you'll have made 2 more payments meaning your principal is lower.

Answer 2

Yes, if you pay every two weeks and not just on the 1st and 15th, for example. Paying every two weeks is what saves you money in the long run, because it amounts to making one extra payment every year. This is because there are 52 weeks in a year, so paying every two weeks is 26 half payments. 26 half payments equals 13 full payments in a year instead of 12 full payments a year with a regular monthly mortgage.

However, you may have to set up that option. Many lenders will not allow partial payments. So, if you just send off half a payment, thinking you would just send the other half in two weeks, you would most likely have the first payment returned. Also, since most mortgages have a 5% late fee for payments made after the 15th of each month, you would be charged every month. If you ask your lender, you may be able to set up the bi-weekly option for little or no fee.

If your lender won't change your payment option (and they don't have to) or if the fee they charge is too much, you can do the same thing for free. Bi-weekly only means one extra payment per year. So, if you just divide your monthly payment by 12 and send that much extra every month, you would accomplish exactly the same thing. For instance, if your payment is $1200 per month, then 1200 divided by 12 is 100. So send in an extra $100 every month with your payment. Technically, if you pay escrowed taxes and/or insurance and/or mortgage insurance, you would be sending in more than one mortgage payment per year, but more is better in terms of savings, so you can't go wrong with this approach.

If you do this from the beginning of the loan, you will pay your home off several years early and save a huge amount of interest. Good luck!

Answer 3

no

biweekly payments means 26 payments of 1/2 the amount a year ... which amounts to making 13 payments of the monthly amount.

So you'd actually do better to make a double payment in the first month of each year -- specifying that the extra is to go toward principle -- and regular payments the rest of the year; and then repeat this cycle every year until your loan is paid off.

[biweekly only gets one half a month's payment in as "extra" twice a year ... and at the end of each six months. Usually, these 'biweekly' mortgage payment programs do not, in fact get the regular payments in any earlier than normal -- that's because your mortgage contains a clause in it prohibiting partial payments without advance permission (which you can't get under normal circumstances).

[the reason for this prohibition is that the mortgage servicing company gets paid every time you make a payment .. so if you make two half size payments a month, they'd get two cuts from the pie and the actual owner of the mortgage would, in effect, pay them twice as much each month.]

So how these 'biweekly' programs actually work is they receive your funds and accumulate them until the actual mortgage due date ... then they send it however much they have. Most months, that is two half size payments but every sixth month, it is three half size payments.

With honest day of receipt credit mortgages, you can due as well or better than someone else's biweekly program by mimicing it yourself and sending in your regular monthly payment every four weeks with a bonus payment equal to one and one half monthly payments each sixth month.

Of course, if you have the funds, you can always pay extra toward the principle owed any or even every month -- that'll reduce your balance even faster.


Now, whether doing this at all is a good financial idea is a completely different question which I'll discuss when someone asks it.

[Hint: the answer is "it depends" ... the fun is what it depends on.]


:-)

Answer 4

No.

The "magic" with bi-weekly payments is the extra payment you end up making during the year.

Here is a easy way to accomplish the same thing:

Take your current payment and divide by 12. Add that much in extra principal to each monthly payment. You will accomplish the same thing as if you were doing bi-weekly payments.

Lastly, never pay a fee to set up a bi-weekly payment program and never refinance just to get in to a bi-weekly mortgage (ie Household Finance or Primerica mortgages).

Answer 5

No.
Paying 2x/month = 24 payments per year.
Paying biweekly = 26 payments per year.

Answer 6

Call your mortgage company and request an amortization on your loan. This will give you an exact break down of interest/principle. Most mortgage companies will charge you extra the way you want it done.