You've likely seen biweekly mortgage payments promotions from your lender or third-party companies if you are a homeowner with a mortgage. Let's look at what a biweekly mortgage payment program is and how you can save money.

What Is A Biweekly Payment Program?

You can make half of your mortgage payment each week with a biweekly mortgage payment plan.

This means that you will be making 26 half-payments per annum, which is equivalent to 13 full monthly payments per annum instead of 12.

Although this is a small budget increase, spreading it over two months instead of one per month might make it feel less. (Of course, everyone is different, so you have to decide if this is the right approach for you.

It has a huge impact. You can save thousands of dollars by setting up a biweekly repayment plan as soon as you begin paying your 30-year fixed loan.

If you have a $200,000 fixed loan over 30 years at 4.5 percent, then a biweekly payment would help you save $27,240. You'll also pay off your loan four years early.

What Is The Risk Of A Biweekly Payout Program?

There may be fees charged for biweekly payments programs, especially those that are run by third parties other than the lender who sends you your monthly loan statements.

For each biweekly payment, they may charge a significant upfront fee and small fees. Participants in up-front fees plans can take as long as ten years to recover their costs. If you sell or refinance prior to that time, your savings potential is diminished.

These fee practices have been criticized by the Consumer Financial Protection Bureau, which is the primary regulator of the mortgage industry. This is good news for consumers as it helps to weed out high-fee vendors.

It's not easy to identify trusted third-party providers. Therefore, the best practice is to set up a biweekly repayment plan with the lender who sends you your monthly loan statements.

Most lenders won't charge any fees for this service. Ask your lender for details about the terms of their biweekly plans.

Another Tip To Benefit From The Biweekly Payment Methodology

You can also manage it yourself to achieve the same goal for guaranteed zero fees.

A biweekly payment plan is mathematically equivalent to a monthly payment program. It's simply a thirteenth monthly installment per year.

The $200,000 loan example shows that your mortgage payment would be $1,013.37 twelve times per year. This amount will be paid a total of $1,013.37 each year. The entire $1,013.37 is applied to principal repayments. You'll then pay your loan off four years and four months early.

You can also divide $1,013.37 into 12 months to pay $84.45 each month in additional principal. So you'll be able to pay your loan off in four years and four more months.

This is done by using an option on your monthly mortgage statements, which allows you to add an optional 'Additional principal' payment.