How biweekly mortgages work

Twelve months and 26 fortnights do not line up, and that mismatch is the whole product. Half of $1,580.17 paid 26 times comes to 13 monthly payments in a calendar year. The extra one arrives with no interest attached to it, so it lands almost entirely on the balance.

The fortnightly rhythm adds a smaller second effect. Because money reaches the loan two weeks earlier than it otherwise would, less interest accrues in between. Together the two take this loan from 360 monthly payments to 628 biweekly periods, which is a little over 24 years.

Interest on a mortgage is charged on the balance outstanding, so anything that lowers the balance sooner lowers every interest charge that follows. Over 30 years this loan would pay $318,861.22 of interest. On the biweekly schedule it pays $245,426.40, and the difference is $73,434.82.

Notice that the saving is not a discount granted by the lender. It is the arithmetic consequence of paying more, sooner, at the same rate. How extra payments work reaches the same result from the other direction, by adding to a monthly payment instead of splitting it.

Not every lender applies a half payment on the day it arrives. Some hold it until the second half turns up, then apply a normal monthly payment, which reproduces the monthly schedule exactly and delivers none of the saving. Others run a formal biweekly programme, occasionally for a fee.

If neither is available, the do-it-yourself version is to divide the monthly payment by 12 and add that amount to each payment. It puts the same extra payment into the year, keeps you in control of it, and can be stopped in a difficult month. The mortgage payoff calculator prices that version.

A biweekly schedule shortens the term and cuts total interest. It does not change the rate, the principal borrowed, or the amortisation rules underneath. It does change cash flow, since money leaves the account 26 times a year rather than 12, and that is the part worth testing against a real budget before committing. Biweekly against monthly sets the two schedules side by side. This is educational material, not financial advice.