How to set up your own biweekly mortgage plan without paying any fees

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How to set up your own biweekly mortgage plan without paying any fees
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Is being able to pay your mortgage off early a dream of yours? With a biweekly mortgage plan, it’s possible to make that dream a reality!

Here’s what you need to know about the biweekly mortgage

Have you received an offer in your mailbox promising that you could save $10,000, $20,000 or even $30,000 on your mortgage by getting set up on a biweekly payment plan?

Money expert Clark Howard says a biweekly plan is the real deal if you want to eliminate housing debt from your life.

“The math behind this idea really works. Pre-paying a mortgage early in a 30-year or 15-year cycle pays off handsomely down the road.”

Table of contents

What is a biweekly mortgage?

A biweekly mortgage, also called an accelerated mortgage, is a specific payment schedule that lets you pay off your mortgage much sooner than you otherwise would. In the process, the plan also allows you to save big bucks that would be squandered on interest.

The basic idea behind a biweekly plan is that you make half of your monthly payment every two weeks.

When it comes to a biweekly payment plan, you can either set one up yourself or pay someone else to do it on your behalf. In fact, banks team up with appointed marketing companies to send out solicitations about biweekly mortgage payments for this purpose.

But here’s the thing: Very often there’s a charge of $200-$400 to set you up on a biweekly payment through a marketing company. The marketing company may also charge a few dollars each time you make a biweekly payment.

In reality, there’s no need to pay anyone to set up an accelerated mortgage payment plan. Here’s how to do it yourself for free…

How do you make biweekly mortgage payments?

When you’re doing a biweekly payment plan, what you’re really doing is making the equivalent of 26 half-payments in a year. So the end result is that you pay 13 months of mortgage payments every 12 months.

If you pay a marketing company to set up a biweekly plan for you, they simply collect your money and make one additional payment toward your mortgage on your behalf at the end of the year.

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So what should you do instead of letting someone else set you up on a biweekly payment plan? Clark has a simple formula:

Keep making monthly mortgage payments as you always do and just add one-twelfth extra in the additional principal box on your monthly coupon.

Let’s say your monthly payment is $1,200. One-twelfth extra would be $100. So you would pay $1,300 each month ($1,200 + $100) instead of just your regular monthly payment. Over the course of a year, that equals out to be 13 payments in a 12-month timeframe.

That way you’ll do for free what a marketing company wants to charge you for — and you’ll bring your principal loan balance down quickly!

Of course, you want to be sure that there’s no prepayment penalty on your mortgage. If there is, that would likely negate the benefit of a biweekly plan.

Furthermore, you want to be sure you’re applying the extra one-twelfth directly to the mortgage principal. Most lenders make it easy to do this with a clearly marked box that says “additional principal.”

Wells Fargo monthly mortgage payment with additional principal
Wells Fargo monthly mortgage payment with additional principal

What you see above is an example from a mortgage held by a Team Clark staff member. The monthly payment is $710.21. One-twelfth of that would be $59.18. So adding those two numbers together, you get the biweekly plan payment of $769.39.

Simple, right? And they didn’t have to pay Wells Fargo or any marketing company to do it for them!

How many years of payments does a biweekly mortgage save?

The amount you can save by doing a biweekly mortgage varies based on your specific mortgage terms and how long of a loan term (15 year vs. 30 year) you took out.

There are a variety of biweekly mortgage calculators you can play around with to see how the numbers would work in your situation. We used the BankRate.com biweekly mortgage calculator to pull the following ballpark figures:

Principal Interest rate Loan term Total interest you save over life of loan Year when you’d be done
$200,000 4% 30 years $23,000 26th year
$250,000 3% 30 years $18,000 26th year
$300,000 3.5% 15 years $10,000 13th year

Final thought

The idea of paying off a mortgage early is alluring to a lot of us. But money expert Clark Howard says it shouldn’t get in the way of some other important financial goals that need to take priority in your life.

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“You don’t want to be all about paying off your mortgage if you’re paying interest on credit cards or if you have student loans or any of a variety of [other] debts,” Clark says.

That’s because mortgage rates generally are lower than the interest rate on any other kind of debt.

Meanwhile, Clark also doesn’t want you to focus on paying off a mortgage if you’re not maxing out retirement accounts that are available to you like a Roth IRA.

“Saving in that Roth is a much higher priority than prepaying on a mortgage,” Clark says.

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