If you’re a homeowner with a mortgage, you know that traditional payment schedules consist of a monthly fee that includes principal, interest, property taxes, homeowners insurance and possibly mortgage insurance. Together with the loan term you chose, these components determine what your monthly mortgage dues will be.
Depending on the above components, it can feel like a big monthly payment that can seem overwhelming when it hits you all at once. It’s for this very reason that some homeowners choose a more manageable biweekly payment program, where the monthly payment amount is broken in half and paid every 2 weeks.
Before you decide whether or not you want to enroll in biweekly mortgage payments, check out our four fast facts about the benefits of biweekly payments. (Spoiler alert: You can save thousands and pay off your mortgage faster!)
Make Smaller Mortgage Payments
Switching to biweekly payments will ultimately make your mortgage payments smaller. For the sake of simplicity, let’s break it down:
There are 52 weeks per year. That means switching to a biweekly payment system will add up to 26 payments per year, resulting in 13 monthly payments total. Compare that to a traditional payment schedule once a month (12 monthly payments), and you’ll find that you’re making one extra monthly mortgage payment toward the principal balance on your loan every year.
However, you’ll also be making smaller payments each billing cycle. While the biweekly payment will add up to the same amount as a monthly payment, the advantage is the smaller, more manageable payments you get to make, allowing for easier budgeting and payment planning.
If you’re opting for biweekly payments as a Quicken Loans® client, note that you have to be 1 month ahead in your payments before starting on the biweekly program. Once you’re set up with the biweekly payment program, your payments will be applied to your loan on a monthly basis.
Pay Off Your Home Quicker
That extra payment every year goes a long way in the life of your loan. It can actually cut years off of your repayment timeline – if you’re making an extra payment every year by switching to a biweekly payment program, you’re building equity in your home quicker than when you were making monthly payments, paying your home off faster.
Let’s put some numbers to this scenario. Say your loan is $200,000 on a 30-year-fixed rate mortgage with a 4.125% interest rate. We’ll take a look at it from both a monthly and biweekly payment perspective.
Biweekly payments mean you pay off your loan 4 years, and 3 months early by making the equivalent of one extra payment per year.
Not only will switching to biweekly payments save you time on the life of your loan, it can save thousands in payments and interest.
Let’s continue with that same scenario of a $200,000 loan amount. By switching to a biweekly payment program, you can see in the table above that you save more than $24,000 in interest over the life of your loan.
To clarify, your principal balance will ultimately add up to the same amount as if you were making monthly payments – the money you save is reflected in the amount of interest you’ll pay over the life of your loan, which is significantly lower when you make biweekly payments.
Think of what you can do with the money you save by switching to biweekly payments! You could fund a home improvement project, save for retirement or even add to your child’s college fund.
Want to see your savings for yourself? Check out our amortization calculator and see how much you can save.
Align Your Payments With Your Pay Schedule
As mentioned above, traditional payments have you paying your mortgage once a month; biweekly payments spread out your payments every 2 weeks. This can come in handy for two reasons:
- If you’re paid every 2 weeks, biweekly payments can be smaller and more manageable and can be scheduled on your paydays.
- If you’re on a fixed income, you don’t have to deal with a large payment due all at once every month.
You can choose a day between the 1st and 14th of the month to start biweekly payments, meaning you can select a day that aligns with your pay schedule. That way, you can guarantee that every 14 days following, half of a mortgage payment will be withdrawn from your bank account. You also don’t have to worry about sending a check each month, as biweekly payments can be automatically withdrawn from your account.
If you’re a current Quicken Loans client, you can sign up for biweekly payments by signing into your account and adjusting your payment program. In fact, signing up for biweekly payments through Quicken Loans is completely free – no extra fees involved.
If have questions on how you can start biweekly payments through Quicken Loans, you can talk to a Home Loan Expert today for more information.