Bi-Weekly Mortgage

A bi-weekly mortgage takes advantage of a little mathematical trick to reduce either the length of the mortgage or the amount paid in interest (they can be organized either way). The trick - not that it is all that complicated - is that the months of the year are not of equal length. As you know, there are twelve monthly payments in a conventional mortgage.

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With a bi-weekly mortgage a payment is made every two weeks. As you know there are 52 weeks in the year and each two weekly payment is usually half the value of a standard monthly one. But 26 payments over the year then adds up to being equal to 13 monthly payments over the year instead of 12. So you are paying off the principal loan more quickly: this will reduce the length of time it takes to finish paying for the house and reduce the final cost of the loan.

There are companies that will help you organize a bi-weekly mortgage if you already have a loan. If you are looking for a new mortgage then the important thing to remember is that you will be paying more each year, but will finish the mortgage more quickly. The actual difference between a standard 30 year mortgage and a bi-weekly mortgage is that in the first example it will take you 30 years to pay for the house. In the second, it will take around 23 and a half years. Most mortgage lenders will allow you to set up your mortgage as a bi-weekly at no extra charge, but converting from a monthly will usually involve some small fees.