Biweekly Mortgage Programs

A bi-weekly mortgage payment plan is the easiest way to save tens of thousands of dollars on your mortgage, and the best thing is, almost everyone can do it.

This page:

  • Explains how a biweekly mortgage works and why it saves cash

  • Describes the best way use a biweekly mortgage program

  • Links to biweekly mortgage calculators

In this section on special mortgages we take a look at jumbo mortgages, zero down mortgages, express mortgages and more.

How biweekly mortgage programs work

Under a bi-weekly plan, instead of making 12 monthly payments, you make 26 bi-weekly ones, in effect making one extra monthly payment per year.

The entire extra payment goes towards paying down the balance of your loan, as you've already paid your yearly interest in the first 24 bi-weekly payments.

This may not sound like much, but, done consistently, it can save you tens of thousands of dollars over the life of your mortgage. And, it is very simple to budget towards, particularly if you are a salaried employee who gets paid every two weeks.

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Our recommended prime lender Eloan does not charge penalties, and allows pre-payment on most of its loans.
For those with credit problems, FullSpectrum Lending also offers bi-weekly plans, depending on your situation.

The best way to use a biweekly mortgage program

Because a bi-weekly mortgage is actually a special money-saving payment plan on a regular mortgage, you can request one even after you get your mortgage. This is very easy to do - just make sure your original mortgage carries no "pre-payment penalties" when you first apply.

There are lenders who market special biweekly programs, but often you pay extra for the privilege. We recommend the do-it-yourself route. Any borrower smart enough to maximize savings with this plan can figure out how to calculate the payments for free. (And we've got calculators that can help.)

But what if you do run into "prepayment penalties" (and chances are, you might)?

The prepayment interest rate trade-off

No regular (that is, not sub prime) mortgage should ever have required pre-payment penalties (and if they do, take your business elsewhere). However, many reputable lenders, like Eloan, will offer a lower interest rate if you agree to such penalties.

And this raises the question: which saves more money, a lower-rate loan with pre-payment penalties, or a higher-rate loan that allows pre-payment?

The answer depends on the rate difference. But, in general, if you pay bi-weekly the loan without penalties saves you more money. That's why lenders offer the lower-rate loan in the first place - to get more cash out of you.

Sub prime mortgages, on the other hand, are more likely to have prepayment penalties (to offset the risk of lending money to customers with poor credit).

In these cases, you may have to pay a fee to have the penalty removed, which is worth paying if you truly intend to pre-pay (the savings should definitely outweigh the cost). In other cases, you may have to agree to a certain time period at the beginning of the loan during which you will not pre-pay. Try Fullspectrum's line of subprime products, or take a look at out special bad-credit-mortgage-guide.

*In either case, check out your savings with our calculators.*

More information on how to set up your own bi-weekly mortgage plan is included in the guide to taking care of your own mortgage

Next: A look at jumbo mortgages.

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