DEFINITION of 'Bi-Monthly Mortgage'
A mortgage plan where half the scheduled monthly payment is made twice a month. This plan is not to be confused with a bi-weekly plan where half the scheduled monthly payment is made every two weeks.
The difference between a bi-monthly and bi-weekly plan is subtle - a bi-weekly plan results in two more payments being made annually than on a bi-monthly plan. In other words, under a bi-monthly plan 24 payments are made annually, while under a bi-weekly plan 26 payments are made annually. This is the equivalent of 12 monthly payments for a bi-monthly plan and 13 monthly payments under a bi-monthly plan.
BREAKING DOWN 'Bi-Monthly Mortgage'
A bi-monthly mortgage plan will result in interest savings over the life of the mortgage. It does this by reducing the principal of the mortgage as each payment is received as opposed to the first payment of the month being held by the lender until the second payment of the month is received (at which point the a full monthly payment is made).