Does Paying Your Mortgage Twice a Month Save Money?

If you own your home, chances are you’re making a mortgage payment each month. There are ways to pay off your mortgage faster, including making a larger payment or paying more than once per month. And maybe you’d love to get your home paid off faster and save money on interest, but you can’t afford to make larger or more frequent payments.

One method of paying off your mortgage involves dividing your usual monthly payment into twice-monthly payments, so you’re effectively not paying more.

Here’s a closer look at how paying your mortgage twice a month works, whether it can still help you pay off your mortgage early, plus an alternative.

Jump to a section:

• Paying Your Mortgage Twice Per Month
• Paying Your Mortgage Every Two Weeks
• Benefits of Paying More Often
• Potential Issues to Consider

Paying Your Mortgage Twice Per Month

You have some options to set up this type of payment. You might be able to do this directly through your lender or by using a third-party bill payment service. You can do it on a schedule that pays twice per month, such as on the 15th and the last day of the month.

>> Read More: Mortgage Calculator

Say your mortgage is $2,000 per month. By paying $1,000 twice a month, or 24 times per year, you would make a total of $24,000 in payments – the same as you would if you paid monthly. But when you pay twice per month, you might be able to decrease the amount of debt that accrues interest each month by paying down the principal of the loan faster.

Paying Your Mortgage Every Two Weeks

If you really want to boost your mortgage payoff, consider paying every two weeks. In that case, you’d make $1,000 payments 26 times per year; that adds up to $26,000 by the end of the year. This means you’d be making what amounts to an extra mortgage payment each year.

Paying your mortgage biweekly can help you get ahead on your mortgage. It also means that during two months out of the year you’ll be making 1.5 times your monthly payment, so be sure your budget can handle it. You don’t want to have to raid your emergency savings account or go into credit card debt to cover your other basic living expenses just to pay your mortgage off faster.

Benefits of Paying Your Mortgage More Often

If you can get this system to work for you, not only can you save on interest, but you might also see a bit of a tax break if you claim mortgage interest as a deduction. You should talk to a licensed accountant to see what impact more frequent mortgage payments can have on your tax situation.

And, of course, if you choose to pay every two weeks, you can pay your mortgage off earlier by making an extra full payment per year. Over a 30-year mortgage, that’s 30 extra payments, totaling 2.5 years off the end of your loan.

Potential Issues to Watch Out For

Unfortunately, there are some pitfalls to this plan as well. Depending on the terms of your loan, you could see a prepayment penalty if you pay off your mortgage early. Talk to your lender to see what penalties exist, if any, before you start this plan.

If you use your lender’s payment plan for twice-monthly or biweekly payments and it uses a third-party payment processor, that company may simply hold your payments until it has the full payment to send—essentially defeating the purpose of paying more often. Third-party payment processors might also charge a high fee, which could also eat into your repayment strategy.

Things to Keep in Mind

Remember to check with your mortgage servicer to see whether it offers the option to pay more than once per month and whether it charges any fees to set up additional payments or issues a prepayment fee.

If you can’t set up biweekly or twice-monthly payments, but you can afford to pay a little more each month, consider dividing the amount of your monthly payment by 12 and add that 1/12 amount as an extra payment marked “apply to principal” – if your lender offers this option. This means it can be put toward the principal of the loan and not the compounding interest. At the end of the year, you’ll get credit for a full extra monthly payment, which can reduce your total loan repayment term.