How to Save Over $16,000 on Your Mortgage

by Christy Bieber | Updated July 19, 2021 - First published on Sept. 4, 2020

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Want to save thousands on your mortgage? This simple hack makes it effortless.

Most homeowners need a mortgage to buy a home, but the interest costs associated with borrowing so much money for such a long time really add up. In fact, with the average mortgage debt per borrower coming in at $202,284 in 2019, a borrower with a 30-year mortgage at a 3.25% interest rate ends up paying around $114,643 in interest costs over the life of the loan.

The good news is that there's a small change that could make a big difference in your total costs: Switch to making half your mortgage payment every two weeks, instead of paying the whole thing once a month.

"Paying your mortgage bi-weekly is one of the simplest tricks to secure big interest savings," according to Nathan Hamilton, director and industry analyst at The Ascent.

Here's why.

Why switching to biweekly payments can help you save money on your mortgage

Mortgage payments are due once a month, but most people get paid biweekly. If you divide your payment in half and pay that half every other week, you'll make 26 half-payments per year. Some quick math will tell you that's 13 months worth of full payments made over a 12-month period. That extra payment lowers your total interest costs and helps you become debt-free sooner.

"In fact, it's possible to save tens of thousands of dollars over the life of a 30-year mortgage by sneaking in the equivalent of an extra mortgage payment each year," Hamilton explained.

How much can making biweekly mortgage payments actually save you?

If you have an average-sized mortgage of around $202,284 at 3.25% for 30 years and you switch to making biweekly payments instead of monthly ones, you'd save around $16,483 in interest costs over the life of your loan. You'd also be done paying off your mortgage in around 26 years instead of 30 years, so you'd be debt-free four years ahead of schedule.

Of course, the specific amount you save depends on the size of your mortgage and your interest rate. You can use an online calculator to help you determine the impact of paying half your mortgage payment every two weeks instead of sending in one monthly check.

How to make biweekly mortgage payments

Some lenders offer a biweekly payment plan, so start by asking your lender if this is an option for you. If so, you can simply change to the new plan and start making payments every other week.

If your lender doesn't offer this, you may be able to manually make a payment for half the amount every two weeks via your lender's website. However, not all mortgage lenders are able to process payments this way (some won't accept payments for less than the full amount), and you need to make sure your lender applies the extra payments to reducing the principal of your loan.

You could also transfer half your mortgage payment amount into a specific bank account every two weeks when you get your paycheck. Then make your monthly payment out of that account each month, using the total balance that's built up that month. Over the course of a year, this effectively tacks on the same extra amount you'd make via paying half-payments every two weeks. Again, you'll need to let your lender know to apply any additional monies in your payment above what is due toward reducing your principal.

Is it worth it to make biweekly mortgage payments?

The savings that comes with biweekly payments can be substantial. For most people, it's not a financial hardship to simply pay half a mortgage payment with each paycheck. In fact, it could help make your household budgeting easier.

But you will be sending extra money to your mortgage company. There's an opportunity cost to doing that, since you can't use the money for anything else. If your mortgage is at a very low interest rate and you could make better use of the money elsewhere, you'll need to think carefully about whether the biweekly payment hack makes sense for you.

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