Biweekly payments: do they really save money?
Paying half your monthly payment every two weeks sounds like the same thing, but it isn’t.
Where the savings come from
There are 52 weeks in a year, so a biweekly schedule makes 26 half payments. That equals 13 full payments instead of 12. You make one extra monthly payment each year, and that extra goes straight to principal.
How much it can save
On a $300,000 loan at 6.5 percent over 30 years, adding one extra payment per year would shorten the loan by roughly 5 years and 10 months and save around $87,000 in interest. Your numbers will differ with the balance and rate.
You don’t need a special program
Some lenders and third-party companies charge a fee to set up biweekly payments. You can get the same effect on your own by adding about one twelfth of your payment to each monthly payment. Enter that amount in the mortgage calculator to check. Make sure the extra is applied to principal, and ask whether your lender charges for extra payments.