Guide
Bi-weekly mortgage payments: 26 half-payments a year and the years they remove
A year has 52 weeks, so it contains 26 periods of two weeks, but only 12 months. If you pay half of your monthly mortgage payment every two weeks, you make 26 half-payments, the equivalent of 13 full payments, instead of 12. That one extra payment a year goes straight to principal, and because a mortgage is long, its effect compounds over decades. This calculator shows how much sooner you would finish and how much interest you would avoid.
The two schedules
The monthly schedule is the usual one: the instalment from the amount, rate and term, paid every month. The bi-weekly schedule pays half of that instalment every 14 days, and applies interest on each payment date at the yearly rate divided by 26. The balance therefore falls a little faster in every period. The page runs the balance down until it reaches zero and counts the payments, which is how it knows the new payoff time.
A worked example
The sample is a 40,00,000 loan at 8.5% over 25 years. The monthly payment is 32,209.08 and the bi-weekly payment 16,104.54. The monthly schedule takes 25 years and costs 56,62,725 in interest. The bi-weekly schedule is finished in 19 years 9 months, after 513 payments, and costs 42,46,558, a saving of 14,16,167 and 5 years 3 months of time. Each year you pay 4,18,718 instead of 3,86,509, which is one extra monthly payment. A US-style example, 350,000 at 6.5% over 30 years, ends in 24 years 2 months and saves 102,809 in interest.
Why the effect is so large
At the start of a long loan, nearly all of an instalment is interest, so an extra payment that goes wholly to principal removes a large block of balance on which interest would have been charged for many years. The earlier the extra money goes in, the more it saves. The same logic is behind the prepayment calculator, and the bi-weekly plan is a regular, automatic version of it.
What your servicer does matters
The saving exists only if the lender applies each half-payment to the loan when it arrives. Some lenders hold the money until a full monthly amount has accumulated and then apply it, which gives no benefit, and some charge a setup fee for the plan. Third-party companies that offer to collect bi-weekly payments for a fee often add little. Ask in writing how payments are applied and whether a fee applies. If not, the same result can come from paying extra yourself.
Edge cases
The calculator assumes 26 payments a year, so a year with 27 pay dates, which happens to people paid fortnightly, is not modelled. Loan terms up to 50 years are accepted, and a rate of zero gives equal payments with no saving. If your loan has a floating rate, the instalment changes with it and the saving will differ from the figure shown.
Limits
Prepayment charges on the loan, taxes and the benefit you could earn by using the extra money elsewhere are not included. The page uses a monthly payment worked from the normal formula, so it may differ a little from your lender’s figure because of rounding.
Related tools
- Mortgage Calculator gives the standard schedule that this page speeds up.
- Loan Prepayment Calculator models a lump sum or a monthly extra on any loan.
- Refinance Calculator shows a different way to save, by lowering the rate.
- Loan Calculator works out the payment for any amount, rate and term.
Checked against the current version of the Bi-Weekly Mortgage Calculator on .