Bi-weekly Mortgage

A bi-weekly mortgage represents one of a few payment schedules that offer alternatives to the typical monthly payment scheme. In a bi-weekly mortgage, you pay half your mortgage every two weeks. This compares to a similar plan called a bi-monthly mortgage, which involves paying a half-payment twice a month (See: Bi-monthly Mortgage).

Same thing, right? Not quite.

In a bi-monthly mortgage, you still end up making the same number of monthly payments. You make 24 payments, each worth half of a monthly payment. That equates to 12 full payments.

In a bi-weekly mortgage, you end up making 26 payments, each worth half of a monthly payment. That equates to 13 full payments, or the equivalent of an extra month's payment each year.

Why? Because months are not the same length ("Thirty days has September, April, June..." etc.). There are 12 months in a year, but 52 weeks, or 26 two-week periods (or 13 four-week periods).

Paying this extra month's worth each year shortens the life of the mortgage, and lowers overall interest expense. Most mortgages allow you to apply additional payments to the principle, lowering the total amount you owe incrementally.

The added benefit of the bi-weekly mortgage is that you can set it up unilaterally. You don't need a separate, previously negotiated program with your bank. As long as each calendar month contains a full payment (meaning two half payments), you'll be in compliance with the mortgage terms.