biweekly mortgage payments imageThis information is provided by our friends at Pentagon Federal Credit Union (PenFed).

If there were an easy way to make your mortgage payments that was guaranteed to nudge you over the payoff line sooner, wouldn’t you do it? Biweekly payment plans let you do exactly that, whether you choose the simplicity of an automatic payment plan that does the work for you or a DIY system that protects your financial flexibility when you need the extra cash for other things.

A biweekly mortgage payment plan changes your traditional once-a-month mortgage payment to every two weeks. Instead of sending in 12 monthly payments, you send in 26 payments a year, or one every other week — a total of 13 “monthly” payments. Since there’s no such thing as a 13-month year, the remaining funds are credited towards your principal balance.

Just how much interest will an early payoff save you? That depends on your mortgage’s interest rate. Run the numbers yourself on Bankrate’s biweekly mortgage payment calculator. A conservative estimate based on today’s mortgage interest rates puts a biweekly plan payoff about four years earlier than a traditional payment plan.

You might have heard that making biweekly payments can help improve your credit score, but the idea doesn’t appear to play out.

Don’t pay to play

The most straightforward way to get the every-other-week advantage is to sign up for a biweekly payment plan. PenFed offers a true biweekly mortgage for 30-year fixed-rate mortgages that call for 26 mortgage payments a year — a payment every 14 days.

But there are good reasons not to set a biweekly schedule in stone. A biweekly payment contract locks you into an agreement to make payments every other week come hell or high water. If things get tight, that can put your wallet in a pinch. A DIY biweekly plan can help you achieve the same benefits but allows you to “skip” extra payments if things get tight — no harm, no foul.

Here’s how to set up your own version of a biweekly payment plan that’s tailored to your own needs.

  • Set up an automatic payment plan and add one-twelfth of your usual payment, earmarked specifically toward principal. If your lender’s online payment system makes it easy, you could even set up the one-twelfth payment as a separate transaction (again, going specifically toward loan principal) two weeks after your usual payment date. 
  • Follow the automatic payment system above, but use personal checks. You control whether or not you add that extra principal every single time you write a check or decide to send in that extra principal payment. It’s harder than it sounds to stick to this sort of honors system for sending extra payments, so use an app to remind you when extra payments are “due.” 

Just don’t pay a third-party finance company to set up and administer a biweekly mortgage payment plan for you. You shouldn’t have to pay to play — this is your mortgage on your terms, and you can make your payments yourself in a way that earn you all the same benefits without tricking you into loan conversion or administration fees or locking you into a biweekly commitment.

If you’re interested in buying or selling a home, take a look at PenFed’s Real Estate Rewards Program.