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Hi all,
I wanted to see if anyone in the FI community is currently paying their mortgage in bi-weekly installments vs the traditional once per month.
I was recently reviewing my mortgage (30 yr and my savings calculator tool indicated I could save $30k in interest payments over the life of the mortgage and reduce my payoff time by 52 months by switching to b-weekly payments. While this sounds like a good deal, I wanted to see if there are any potential pitfalls.
Nathan_B
3 months ago
What ever makes you comfortable, there is some discussion in this thread about the interest rate vs potential gains in investment.
I’m on the bi-weekly payment plan, it was a couple of clicks on my mortgage providers app. I also added a bit to each auto payment as well. My goal is to have the home paid off prior to retirement.
For me this is about peace of mind. I absolutely could make more by investing these additional payments but that’s not my personal goal.
Fabiooltje
7 months ago
Bi-weekly also means you are making two extra mortgage payments per year.
If the interest rate on your mortgage is say 4% or lower, I would say it is more worthwhile to invest that money into the stock market, because the stock market will very likely see a return higher than 4% per year in the long run. Then you come out ahead by probably tens of thousands of dollars.
smh77
7 months ago
Run the math in an amortization spreadsheet. We are at 2.25%, there is nearly no savings at all going to biweekly. If you are closer to 7-9% I bet there is a savings. Keep in mind, many people who started doing this had mortgages in the 1980's when interest rates were 13%+, it made a huge difference.
jane0036
7 months ago
No pitfalls. We went with the option of when we refinanced to just keep paying our original mortgage price. I think it will halve our 15-year mortgage timeline.
Brandon Nunnery
8 months ago
Bi-weekly, especially if you/spouse are paid bi-weekly. You won't feel it even on the extra payment periods because you will also have an extra paycheck that month too.
mattburtonme
8 months ago
Thanks everyone for your responses!
BostonFI
8 months ago
It's a legitimate strategy as it saves on interest over the life of the loan. The strategy is described in the book, Automatic Millionaire by David Bach. The bi-weekly payments result in you paying 13 monthly payments instead of 12 over the course of a year.
newfi25
8 months ago
To me it sounds like a gimmick way of making extra principal payments with extra paperwork.
Just round up your monthly payment will have the same or better effect. If your mortgage is $1234.54 pay $1500.
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