Bi-weekly Mortgage


DEFINITION of 'Bi-weekly Mortgage'

A mortgage payment plan where payments are made every two weeks, as opposed to the more traditional monthly payment plan. Making mortgage payments every two weeks, as opposed to monthly, will result in the equivalent of one additional monthly payment being made each year. This extra payment is applied toward the principal balance of the mortgage, and will lead to substantial interest savings over the life of a long-term mortgage.

BREAKING DOWN 'Bi-weekly Mortgage'

When a bi-weekly payment plan is set up, most mortgage servicing companies simply hold the first half of the monthly payment until the second half arrives and then make the full monthly payment. If a simple interest bi-weekly mortgage plan can be set up, each payment received is immediately applied toward to principal balance of the mortgage leading to additional interest savings.

Converting an existing mortgage to a bi-weekly plan usually carries some fees. A self-disciplined borrower can gain the same benefits of a bi-weekly plan by making one additional mortgage payment each year, or by paying an extra amount each month equal to 1/12 of the scheduled monthly payment.

  1. Compound Interest

    Compound Interest is interest calculated on the initial principal ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Graduated Payment Mortgage

    A type of fixed-rate mortgage in which the payment increases ...
  4. Interest-Only Mortgage

    A type of mortgage in which the mortgagor is only required to ...
  5. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against ...
  6. Accelerated Payments

    A term associated with making additional unscheduled payments ...
Related Articles
  1. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  2. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  3. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Retirement

    Using Your 401(k) to Pay Off a Mortgage: The Pros and Cons

    Learn the advantages and drawbacks of using assets accumulated within a 401(k) retirement savings plan to pay down a mortgage balance.
  5. Retirement

    Should Retirees Still Have Mortgages?

    Identify the pros and cons of keeping a mortgage into retirement, and understand in which situations it is beneficial not to pay off a mortgage.
  6. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  7. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  8. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  9. Investing

    Where Should I Keep My Down Payment Savings?

    While saving up for a down payment, where should you keep your money. A bank? The stock market? It all depends on your timeline.
  10. Credit & Loans

    Questions To Ask Your Mortgage Lender

    When buying a house, avoid nasty surprises by asking the right questions about your mortgage lender's qualifications and the mortgage process.
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!