A bi-weekly mortgage payment plan is a strategy where you pay half of your monthly mortgage payment every two weeks. Since there are 52 weeks in a year, this results in 26 half-payments, which is equivalent to 13 full monthly payments annually (instead of the standard 12). This extra payment per year can significantly accelerate your mortgage payoff, leading to substantial savings on interest over the life of the loan.
How it Works
Traditionally, mortgages are paid monthly. However, many lenders and servicers offer or allow bi-weekly payment plans. In a true bi-weekly plan, half of your normal monthly payment is automatically deducted from your bank account every two weeks. For example, if your monthly payment is $1,000, you would pay $500 every two weeks. Over a year, you'd pay $500 x 26 = $13,000, which is $1,000 more than a standard 12 monthly payments ($1,000 x 12 = $12,000). This extra amount ($1,000 in this example) goes directly towards your principal balance.
Important Note: Be cautious of informal bi-weekly plans where you simply send in extra payments yourself. Ensure that your lender applies the extra amounts directly to the principal. Some lenders might treat the extra payment as an advance on the next scheduled payment rather than an accelerated principal reduction. Always confirm with your mortgage servicer how extra payments are applied.
The Math Behind the Calculator
The calculation involves a few steps:
Calculate the standard monthly payment (P&I): This uses the standard mortgage payment formula.
Determine the bi-weekly payment amount: This is typically half of the monthly payment.
Calculate the total number of payments and interest saved: By making 13 monthly payments worth of principal and interest over 12 months, you shorten the loan term and reduce the total interest paid.
The formula for the monthly mortgage payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount
i = Monthly interest rate (Annual rate / 12)
n = Total number of payments over the loan's lifetime (Loan term in years * 12)
Once the monthly payment (M) is calculated:
Bi-weekly payment = M / 2
The extra principal payment per year = M (since you make 13 full payments worth of principal and interest over 12 months).
This calculator simplifies the process by directly calculating the bi-weekly payment amount based on the inputs. It shows the result of one bi-weekly payment.
Benefits of Bi-Weekly Payments
Faster Equity Building: Paying down principal faster means you build equity in your home more quickly.
Significant Interest Savings: By shortening the loan term, you pay considerably less interest over time.
Convenience: Automating payments can help avoid missed payments and simplify budgeting.
Reduced Loan Term: A 30-year mortgage can often be paid off in about 25-26 years with a bi-weekly plan.
Considerations
Not all lenders offer true bi-weekly payment plans, or they may charge fees. Ensure you understand the terms and conditions with your specific mortgage servicer. If a formal plan isn't available or suitable, you can achieve similar results by making one extra monthly payment each year, either by dividing it into smaller extra payments throughout the year or by making a lump sum payment annually. Always ensure these extra payments are applied to your principal.
function calculateBiWeeklyMortgage() {
var principal = parseFloat(document.getElementById("loanAmount").value);
var annualRate = parseFloat(document.getElementById("annualInterestRate").value);
var termYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(principal) || principal <= 0) {
resultDiv.innerHTML = "Please enter a valid loan amount.";
return;
}
if (isNaN(annualRate) || annualRate < 0) {
resultDiv.innerHTML = "Please enter a valid annual interest rate.";
return;
}
if (isNaN(termYears) || termYears 0) {
monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
// Handle case of 0% interest rate
monthlyPayment = principal / numberOfPayments;
}
// Calculate the bi-weekly payment
var biWeeklyPayment = monthlyPayment / 2;
// Format the results
var formattedBiWeeklyPayment = biWeeklyPayment.toFixed(2);
// Display the result
resultDiv.innerHTML = "Your Bi-Weekly Payment is:$" + formattedBiWeeklyPayment + "";
}