Biweekly Mortgage Calculator

A biweekly mortgage payment is a strategy where you pay half your monthly payment every two weeks instead of making one full payment per month. HOW IT WORKS: • Monthly: 12 payments per year • Biweekly: 26 half-payments per year (every 2 weeks) • 26 half-payments = 13 full monthly payments • Extra payment goes directly to principal THE MATH: • Monthly payment: $2,528 (example) • Biweekly payment: $1,264 (half) • 26 biweekly = $32,864/year • 12 monthly = $30,336/year • Extra per year: $2,528 (one full payment) WHY IT SAVES MONEY: • Extra payment reduces principal faster • Less principal = less interest accrued • Accelerates loan payoff by 4-6 years • Typical interest savings: 15-25% IMPORTANT: The biweekly payment is exactly half the monthly payment, so each individual payment feels manageable while the extra annual payment compounds to significant savings.

The savings from biweekly payments depend on your loan amount, interest rate, and term. Here are realistic examples: EXAMPLE 1: $300,000 loan at 6.5%, 30 years • Monthly payment: $1,896 • Biweekly payment: $948 • Interest savings: $88,000+ • Time savings: ~5 years • Pay off in ~25 years instead of 30 EXAMPLE 2: $400,000 loan at 7%, 30 years • Monthly payment: $2,661 • Biweekly payment: $1,331 • Interest savings: $130,000+ • Time savings: ~5.5 years • Pay off in ~24.5 years EXAMPLE 3: $500,000 loan at 6%, 30 years • Monthly payment: $2,998 • Biweekly payment: $1,499 • Interest savings: $120,000+ • Time savings: ~5 years FACTORS AFFECTING SAVINGS: • Higher interest rate = more savings • Larger loan = more savings • Longer term = more savings • Starting early = more savings The key is that every extra dollar toward principal reduces future interest charges, creating a compound effect over time.

Both strategies can be effective, but they work differently: BIWEEKLY PAYMENTS: ✓ Automatic extra payment built-in ✓ Aligns with biweekly paychecks ✓ Requires less discipline ✓ 13 payments per year guaranteed ✗ May have lender setup fees ✗ Requires lender program enrollment EXTRA MONTHLY PAYMENTS: ✓ More flexible timing ✓ Can adjust based on finances ✓ No program enrollment needed ✓ Can target specific amounts ✗ Requires discipline to maintain ✗ Easy to skip when tight MATHEMATICAL COMPARISON: • Biweekly: Extra $2,528/year (example) • Extra monthly: $210/month = $2,520/year • Nearly identical if consistent DIY BIWEEKLY ALTERNATIVE: Instead of official biweekly program: • Divide monthly payment by 12 • Add that amount to each monthly payment • Example: $2,528 ÷ 12 = $211 extra/month • Same effect, no program fees BEST APPROACH: • Biweekly if you need automatic discipline • Extra payments if you want flexibility • Either way, consistency is key

Not all lenders offer official biweekly payment programs, and the terms vary significantly. LENDER PROGRAMS: • Major banks: Most offer biweekly options • Credit unions: Often available, sometimes free • Mortgage servicers: Varies widely • Some charge setup/monthly fees TYPICAL FEES: • Setup fee: $0-$500 • Monthly fee: $0-$10/month • Transaction fee: $0-$3/payment • Annual fee: $0-$50 RED FLAGS TO AVOID: • High setup fees (over $300) • Monthly maintenance fees • Programs that hold payments in account • Third-party payment services with fees HOW TO CHECK: 1. Call your lender/servicer directly 2. Ask about their biweekly program 3. Get all fees in writing 4. Ask if payments apply immediately DIY ALTERNATIVES: If your lender doesn't offer biweekly: • Make 13th payment annually • Add 1/12 to each monthly payment • Make extra principal-only payments • Split monthly payment (some lenders) IMPORTANT: Some programs hold your payments and only apply monthly, eliminating the interest-saving benefit. Ensure payments apply every two weeks.

While biweekly payments can be beneficial, they're not always the best choice: DON'T USE BIWEEKLY IF: 1. You Have High-Interest Debt • Credit cards (15-25% APR) • Personal loans (10-15% APR) • Pay these first, then mortgage 2. No Emergency Fund • Build 3-6 months expenses first • Liquidity more important than mortgage payoff • Can't "un-pay" mortgage in emergency 3. Not Maximizing Retirement Matches • Employer 401(k) match = 50-100% return • Better than 6-7% mortgage savings • Prioritize free money first 4. Variable/Unstable Income • Biweekly requires consistent payments • May cause cash flow issues • Monthly provides more flexibility 5. Prepayment Penalties • Some loans penalize early payoff • Check your mortgage documents • Calculate if penalty exceeds savings 6. Low Interest Rate Mortgage • 3% mortgage vs 10% investment return • May be better to invest extra • Consider opportunity cost 7. Planning to Refinance Soon • Savings accumulate over time • Moving/refinancing within 2-3 years • May not realize full benefit BETTER ALTERNATIVES: • Pay off high-interest debt • Build emergency fund • Max retirement contributions • Invest in index funds • Then accelerate mortgage

Biweekly payments can impact your tax deductions, though the effect is usually minor. TAX IMPLICATIONS: INTEREST DEDUCTION: • You pay LESS interest with biweekly • Therefore, LESS to deduct • But you also spend LESS on interest • Net savings still positive EXAMPLE ($400,000 loan, 7%): Monthly Payments (30 years): • Total interest: $558,000 • Annual deduction: ~$27,000 (early years) Biweekly Payments (~25 years): • Total interest: $428,000 • Annual deduction: ~$25,000 (early years) • Actual savings: $130,000 THE MATH: • Lost deductions: ~$2,000/year × tax rate • At 24% bracket: ~$480 less refund/year • But saved $5,200 in interest/year • Net benefit: ~$4,720/year CURRENT TAX LANDSCAPE: • Standard deduction: $29,200 (married, 2024) • Many don't itemize anymore • SALT cap limits deductions • Mortgage interest less valuable IMPORTANT: Even with slightly lower deductions, you're still better off paying less interest overall. The tax deduction only returns a portion (your tax rate %) of what you pay.

These are two different payment strategies, and understanding the difference is crucial: STANDARD BIWEEKLY: • Monthly payment ÷ 2 = biweekly amount • 26 payments per year • Equals 13 monthly payments • Saves 4-6 years on 30-year mortgage ACCELERATED BIWEEKLY: • Monthly payment × 12 ÷ 26 = biweekly amount • Same 26 payments per year • BUT each payment is slightly larger • Often used in Canada CALCULATION COMPARISON ($2,528 monthly): Standard Biweekly: • $2,528 ÷ 2 = $1,264 per payment • $1,264 × 26 = $32,864/year • Extra vs monthly: $2,528/year Accelerated Biweekly: • $2,528 × 12 ÷ 26 = $1,167 per payment • $1,167 × 26 = $30,342/year • Same as 12 monthly payments WHICH IS BETTER: • Standard biweekly saves MORE • Has built-in extra payment • Accelerated just spreads payments • Always choose standard biweekly WARNING: Some lenders call their program "biweekly" but it's actually accelerated (no extra payment). Always confirm you're making 13 equivalent monthly payments per year.

Yes, you can typically switch back to monthly payments, but there are considerations: SWITCHING BACK: • Most lenders allow changes • May require written request • Could take 1-2 billing cycles • No penalty in most cases HOW TO SWITCH: 1. Contact your lender/servicer 2. Request change in writing 3. Confirm effective date 4. Verify first monthly payment date REASONS TO SWITCH BACK: • Income changed (job loss, reduction) • Cash flow needs changed • Preparing for large expense • Refinancing mortgage • Paying off other debt THINGS TO KNOW: • Progress made isn't lost • Principal paid stays paid • Amortization will adjust • Future payments reflect balance AUTOMATIC VS MANUAL: • If using lender program: contact them • If DIY biweekly: just change payment • No formal process for DIY FINANCIAL FLEXIBILITY TIP: Consider DIY biweekly approach: • Make regular monthly payment • Add extra to principal when able • Skip extra in tight months • More control, same potential savings

The timing of biweekly payments creates interest savings through more frequent principal reduction: HOW INTEREST ACCRUES: • Daily interest = Principal × (Rate ÷ 365) • Lower principal = less daily interest • Biweekly reduces principal every 14 days • Monthly reduces principal every 30 days TIMING ADVANTAGE: Monthly Payment: Day 1: Pay $2,528 Day 2-30: Interest on full balance Day 30: Next payment due Biweekly Payment: Day 1: Pay $1,264, principal drops Day 2-14: Interest on reduced balance Day 14: Pay $1,264, principal drops again Day 15-28: Interest on further reduced balance THE COMPOUNDING EFFECT: • Each biweekly payment reduces principal • Next two weeks accrue less interest • More of next payment goes to principal • Creates accelerating payoff EXAMPLE CALCULATION ($400,000 at 7%): Monthly interest: $400,000 × 7% ÷ 12 = $2,333 After biweekly payment #1: Principal = $398,736 Next 14 days interest: $398,736 × 7% ÷ 26 = $1,073 (Less than half of monthly interest) This timing advantage, combined with the extra annual payment, creates significant long-term savings.

This depends on several factors. Let's compare the options: REFINANCE MAKES SENSE IF: • Can reduce rate by 0.75%+ • Plan to stay 5+ years • Break-even < remaining time in home • Closing costs reasonable ($3,000-$6,000) BIWEEKLY MAKES SENSE IF: • Already have good rate • Don't want closing costs • Want to pay off faster • Current rate is competitive COMPARISON EXAMPLE: Current: $400,000 at 7%, 30 years Monthly payment: $2,661 Option A: Refinance to 6% • New payment: $2,398 • Monthly savings: $263 • Closing costs: $5,000 • Break-even: 19 months Option B: Biweekly at 7% • Payment: $1,331 (half) • Extra cost: $2,661/year • Interest savings: $130,000 • Time savings: 5.5 years COMBINE BOTH: Best strategy may be: 1. Refinance if rate drop significant 2. Then do biweekly on new loan 3. Maximum savings achieved QUESTIONS TO ASK: • What's my current rate vs available? • How long will I keep this mortgage? • Can I afford biweekly payments? • What are refinance closing costs? • What's my break-even period? GENERAL GUIDELINES: • Rate drop > 1%: Refinance first • Rate drop < 0.5%: Biweekly instead • Rate drop 0.5-1%: Calculate both

There are three main ways to set up biweekly payments: OPTION 1: LENDER PROGRAM Steps: 1. Call your mortgage servicer 2. Ask about biweekly payment program 3. Inquire about any fees 4. Complete enrollment form 5. Set up auto-pay from checking 6. Confirm payments apply immediately Pros: Automatic, structured Cons: May have fees OPTION 2: BANK AUTO-PAY Steps: 1. Log into your bank account 2. Set up recurring transfer 3. Amount: Half monthly payment 4. Frequency: Every 2 weeks 5. Payee: Your mortgage lender 6. Note: "Apply to principal" Pros: No lender fees Cons: Requires manual setup OPTION 3: DIY MONTHLY Steps: 1. Calculate: Monthly payment ÷ 12 2. Add this to each monthly payment 3. Mark as "principal only" 4. Same annual extra payment Example: $2,528 ÷ 12 = $211 extra/month Pros: Most flexible Cons: Requires discipline IMPORTANT TIPS: • Verify payments apply to principal • Check statement after first payment • Ensure no prepayment penalty • Keep records of extra payments • Confirm payoff date adjusts ALIGNMENT WITH PAYCHECK: If paid biweekly: • Set payment for payday • Half payment each check • Never feel the extra cost

Escrow accounts (for taxes and insurance) work slightly differently with biweekly payments: HOW ESCROW WORKS: • Lender holds funds for taxes/insurance • Included in your monthly payment • Paid to tax/insurance when due • Annual escrow analysis adjusts amount BIWEEKLY ESCROW OPTIONS: Option 1: Included in Biweekly • Half of escrow each biweekly payment • 26 half-payments to escrow • Slightly more in escrow annually • Covers any shortfalls automatically Option 2: Separate Escrow • Biweekly covers P&I only • Escrow billed monthly • Two separate payments • Less common arrangement ESCROW CALCULATION: Monthly payment breakdown: • Principal & Interest: $2,200 • Escrow (taxes + insurance): $400 • Total: $2,600 Biweekly with escrow: • P&I: $1,100 • Escrow: $200 • Total biweekly: $1,300 POTENTIAL ISSUES: • Escrow shortage: Less common with biweekly • Escrow surplus: May get refund • Tax/insurance increases: Adjust biweekly • Analysis timing: Still annual TIPS: • Ask lender how escrow is handled • Monitor annual escrow analysis • Request refund if surplus > $50 • Update if taxes/insurance change IMPORTANT: The biweekly payment advantage applies to principal and interest, not escrow. Escrow amount stays the same regardless of payment frequency.