To pay a biweekly mortgage, the borrower pays half a monthly payment every other week. Over the span of a year, he pays 26 payments, which is the equivalent of 13 monthly payments. On a 30-year fixed mortgage, every extra monthly payment made per year over the life of the loan reduces the term by SEVEN years, which drastically reduces the overall interest expense of the loan.

On the Other: Fees are Higher

Many banks charge borrowers up to $4 per payment for a biweekly mortgage. The borrower can garner the same results by simply dividing a monthly payment by 12 and add that 1/12 payment to his mortgage payment each month for free. At the end of the year, the borrower has made one extra monthly payment and saved up to $104 in fees, which can be applied to the mortgage principal.

Bottom Line

Extra monthly payments on a mortgage are always a good idea. They reduce the term of the loan and save the borrower tens of thousands in interest; however, if the lender charges the borrower for the extra payments, it can become cost prohibitive. A borrower can use the budgeting method that works best for him, be it a slightly higher monthly payment or a lump sum payment once a year, to reduce the principal and term of his mortgage debt.

Source:

Kiplinger.com: Extra Mortgage Payments Can Pay Off

BankRate.com: Biweekly Mortgage Plans Too Inflexible