Many clients inquire about bi-weekly payments. Bi-weekly payments are just as they sound, you make a payment every two weeks instead of every month. By doing this you can pay your loan off faster and you can line your payments up with your pay checks. By paying every 2 weeks you will make 26 payments a year. This is the same as making 13 monthly payments a year instead of 12. Most mortgage servicers allow you to do this if you request it. Once you have made your first monthly payment or your loan has been sold to your new servicer you can call customer support and set up bi-weekly payments. Most servicers will require that you do automatic withdrawals or ach payments as well. This makes the most sense to make sure you don’t forget to make a payment and all your payments are on time. An example of how much money you can save by making bi-weekly payments would go something like this. I’ll use a $200,000 mortgage at an interest rate of 4.75%.

The Monthly payment would be $1043.29 for Principle and Interest. The total interest paid would be $175,586.08 assuming you make your minimum payment every month. If you do bi weekly payment’s you would pay $521.65 every 2 weeks and your total interest would be $143,407.66. You can see that you can save $32,178.42 using biweekly payments. That is a considerable savings. In addition to the interest savings you will also pay your loan off in about 25 years instead of 30. I always recommend trying to do a shorter term if you ca swing it. Doing  a 15 year loan instead of a 30 could save you the cost of college.

Another way to do this without making bi-weekly payments is just making an additional payment every year. This will effectively do the same thing. Any additional interest payments especially at the beginning of the loan term save you money. Just by paying an extra principle amount of $100.00 on your first payment will save you $313 over a thirty year term so you could see how that can add up over time!