Shrink Your Mortgage With the Bi-Monthly Payment Program

Bi-monthly mortgage payments are a great alternative to shorten the duration of your mortgage without the expense of refinancing your house to a shorter term. 

The concept of the bi-monthly mortgage payment is simple: by paying half of your mortgage payment every two weeks, the term and interest of your mortgage is greatly reduced.

How Bi-Monthly Mortgage Payments Work

For an individual who is paid every two weeks, the bi-monthly payment can typically be scheduled around the person’s pay periods for convenience and is usually the same amount per remittance. 

The result of making a half payment every two weeks is that one additional payment per year is applied to the principal balance of the mortgage.

The bi-monthly system usually applies the first half of the monthly payment to the principal, then if needed, the interest of the mortgage. The second half of the monthly payment is applied towards the interest, thereby resulting in reduced interest over the life of the loan. 

How the Bi-Monthly Program Can Help You Save

This system usually reduces the time needed to pay off a mortgage and eliminates thousands of dollars in interest expense. The typical 30-year mortgage will be paid off 6 to 10 years sooner with a bi-monthly payment system.

By using the bi-monthly repayment option, equity builds fifty to one hundred fifty times faster in the first five years of the mortgage than a traditional 30-year fixed amortized loan. Other positive attributes of a bi-monthly payment program include:

• Reduced debt
• Increased credit scores
• Eliminating PMI faster through building equity more quickly

Below is an example of typical 30-year fixed mortgage based on a $100,000 mortgage at a 4% fixed interest rate. The monthly payment is $727.42 ($477.42 Principal and interest and $250 for escrows).

As you can see, the bi-monthly payment option reduces the interest expense by nearly $26,000 and results in the mortgage being paid off after 24.3 years.

The bi-monthly payment alternative is a wonderful tool for reducing your overall interest expense and term of your mortgage, but carefully consider any cost associated with using a bi-monthly payment program.

Many companies charge an upfront fee to enroll in their bi-monthly program or charge fees per payment deduction that may reduce the overall savings. 

If you want to use the program, be sure you shop around and find a trusted, licensed lender who will not overcharge you for enrolling. 

Michael Zuren, PhD

I have 25 years experience in the mortgage banking industry. My experience includes the following loan types: (1) HomePath, (2) OHFA, (3) FHA 203k, (4) VA, and (5) USDA financing. I have been serving Cuyahoga, Lake, Geauga, and Ashtabula counties in Northern Ohio... more