It a sort of is. The main distinction between the two is the number of period payments made within each mortgage year. You may have a conventional mortgage with a period payment due twice a month, which is very close to, but not exactly every other week. With a conventional mortgage you make 12 (months)* 2 (payments a month) = 24 payments a year. If you pay every other week instead, you will make 52 (weeks in a year)/2 = 26 payments, which means that without too much effort you can pay your mortgage off sooner. In fact, a biweekly mortgage based on a 7% 30 year conventional Fixed Rate Mortgage plan pays off in 23 years 11 months.

However, a biweekly mortgage is not always the best option. Alternatively, you can achieve the same result with a conventional mortgage and some extra payments, if your mortgage carries no prepayment penalties. The advantage of this system is that you are free to make the extra payments whenever you find it appropriate. With a biweekly plan you are obliged to pay every other week. It is pretty much a matter of discipline, which you may or may not lack in the mortgage payment business.

For more details read Biweekly Mortgages.

 It’s amazing how surprised people usually are to find out how much an extra $20 payment may save them on their loan in the long run. For example, a $100,000 30-year mortgage bearing 9 percent annual interest calls for monthly payments of $804.62. Suppose a borrower could afford to increase the payment amount by $20 to $824.62, and the lender does not charge prepayment penalties. By making the larger payment each month, the borrower would save $24,135.56. No, you didn’t misread the amount. An extra $20 a month results in roughly $24,000 of interest savings!

Here is our little manual on how to work your own miracle.

First of all, the topic you absolutely must discuss with your mortgage lender is the treatment of extra payments towards principal, because some lenders tend to include a penalty clause regarding extra principal payments in the mortgage. If your credit score is not particularly high, you will very likely have a mortgage loan with a higher-than-average interest rate, and you may be penalized if you try to make extra or early principal payments on the loan.

If your lender allows you to make extra payments - it is action time! Read the rest of this article »

A Biweekly Mortgage, unlike its name may suggest, is not a regular mortgage with a payment period of two weeks. In most cases, a product offered to you as a Biweekly Mortgage is, in fact, a Biweekly Accelerated Mortgage. Its main advantage is the accelerated repayment mechanism it is based on. A conventional 30 year fixed rate mortgage implies 12 months * 30 years = 360 monthly payments. Depending on your contract, you can pay the monthly amount either once a month in a lump sum (12 payments a year), or half the amount twice within a month - say, on the 1^st and on the 15^th day of each month (24 payments a year), or you can pay half the monthly amount every other week and end up with 26 payments a year. The latter case represents the biweekly mortgage and is formally a special type of mortgage, different from simply two payments within a month; it requires a contract that defines it as a Biweekly with all the properties attached.

Basically, the main distinction is the number of payments that fit within a loan year. The trick plays itself. You pay half the monthly amount every two weeks: 52 weeks in a year /2 = 26 payments, which equals to 26/2 = 13 months, i.e. your loan year happens to consist of 13 months! The big deal is that it accelerates the process of loan amortization a lot. A biweekly mortgage based on a 7% 30 year conventional Fixed Rate Mortgage plan pays off in 23 years 11 months instead! The acceleration appears only due to the 13^th “month” every year. Read the rest of this article »