Should you make bi-weekly mortgage payments?

Lately I’ve been receiving a lot of calls about offers my clients have received about bi-weekly payments. I wanted to take a minute to set the record straight because banks are charging a fee for this service, and there’s only one reason that you should ever pay the fee….

The pitch to you will look something like this:

1. Bi weekly payment allows you to pay half your mortgage every 2 weeks, rather than paying once a month. This is useful for those who receive paychecks every other week and prefer to budget accordingly.
2. The net effect of the bi-weekly payment is that you pay down your mortgage faster than you would by making your normal monthly installments. 

If you like the sound of #1 enough to justify paying the fee, then go ahead and sign up. If #2 is your motivation and you’re okay making mortgage payments once a month, then DO NOT PAY THIS FEE. You can accomplish EXACTLY the same result doing it on your own.

In a bi-weekly payment situation you simply end up making 13 mortgage payments per year rather than the normal 12. 52 weeks in a year means 26 half payments per year…. 26 half payments equals 13 full payments. It’s as simple as that. Any time you pay over and above your minimum required payment, the result is that you pay the loan back faster than the amortization calls for, and as a result you reduce the effective amount of interest you pay over the life of the loan.