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Can I Split My Mortgage Payment Into Two Payments

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How Many Years Does Biweekly Payments Save On 20 Year Mortgage

How To Calculate Your Monthly Mortgage Payment Given The Principal, Interest Rate, & Loan Period

Anything over that amount must be directed toward reducing your remaining principal balance. The bi-weekly scheme actually provides a 13th monthly payment each year, and that extra must be aplied to lowering your balance. At today’s mortgage rates, bi-weekly payments shorten your loan term by four years.

How Many Years Does Biweekly Payments Save On 15 Year Mortgage

For example, I assumed you had a $100,000 mortgage at a 4.5 percent interest rate and 15 years to go. With a bi-weekly payment schedule, you’ll own your home in 13.5 years and save $4,193 on interest compared to making the monthly payment over 15 years. The typical drawback to this payment scheme is a big one: fees.

Biweekly Mortgage Payments: Do They Make Sense For You

Biweekly payments can help you save money by paying extra principal throughout the year.

Edited byChris JenningsUpdated April 25, 2022

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. By refinancing your mortgage, total finance charges may be higher over the life of the loan. Credible Operations, Inc. NMLS # 1681276, is referred to here as Credible.

Paying your mortgage biweekly is a strategy that can reduce your principal balance faster and cut your total interest costs, allowing you to own your home debt-free sooner. However, it might not be as effective as you think because of how mortgage servicers can handle extra payments.

Heres what you need to know about biweekly mortgage payments:

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Refinance To A Shorter Loan Term

Best if: Refinancing will substantially lower your interest rate

Refinancing to a shorter loan term only makes financial sense if your interest rate savings will exceed the closing costs for your new loan. The fewer months itll take for you to gain this benefit, the better, but your breakeven point should definitely be sooner than when you expect to sell your home.

If youre ready to refinance, Credible makes the whole process easy. You can compare multiple lenders and see prequalified refinance rates in as little as three minutes without leaving our platform.

Find out if refinancing is right for you

  • Actual rates from multiple lenders In 3 minutes, get actual prequalified rates without impacting your credit score.
  • Smart technology We streamline the questions you need to answer and automate the document upload process.
  • End-to-end experience Complete the entire origination process from rate comparison up to closing, all on Credible.

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Convenient Online Payment Features

How to use Your Home to pay Your Mortgage

Reduced number of years for your early pay-off date and reduced interest paid depends on loan amount, interest rates, and every two weeks or weekly payment plan start time. These plans will not automatically shorten the loan term of any adjustable-rate mortgage product.

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Less Money For Other Needs

Before you commit to making biweekly mortgage payments, consider whether doing so would benefit your overall financial plan. A biweekly plan means putting more money toward your mortgage every year, which could pull from other financial obligations like saving for retirement or paying off high-interest debt. Be sure to work a biweekly payment plan into your budget and see if the savings outweigh any losses elsewhere.

Paying the extra amount means a portion of your monthly money is tied up elsewhere, and without proper planning, this might affect your budget and your ability to pay for other pressing financial needs besides your mortgage, explains Connie Heintz, founder and president of DIYoffer, a for-sale-by-owner toolkit.

If you have already locked in a low interest rate, accelerating your mortgage might not make much of a difference, Heintz adds. Youll just put in more of your money toward paying the mortgage.

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What Is A Split Mortgage

A split mortgage, or a split rate home loan, is a loan feature that allows you to split your home loan into multiple loan accounts that attract different interest rates.

A popular example for this is to split the home loan into a variable interest rate component and have the rest of the loan amount fixed.

The fixed component effectively allows you to manage the risk of interest rate fluctuations.

At the same time, you can take advantage of rate cuts with the variable portion.

You can allocate as much as you want to each account as long as its allowed by the lender.

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Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.

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Is It Better To Split My Mortgage Payment Into Two Payments

Bach explains: By paying half of your monthly payment every two weeks, over the course of a year you will make 26 half-payments the equivalent of 13 full payments, or one more payment than there are months in a year. Making more payments means paying your mortgage off sooner, which means paying less in interest.

What You Should Look For

In order for the homeowner to build equity in their home at a faster pace, the homeowner must have a lender that will credit half of the monthly payment immediately. If the lender waits until the next payment has been received before crediting it to the loans principal, the homeowner will not see the full benefit. Many lenders decide to hold partial payments in an account until the rest of it is received. This is the case in which the homeowner will not benefit from half payments.

Many companies will make the offer to convert a mortgage to a bi-weekly payment plan with a fee. The lender will automatically withdraw the payments from the homeowners bank account every two weeks. It is important to read the small print associated with this. Many of them only pay the lender once every month, so that extra payment doesnt get applied to the loan until the end of the year. In the meantime, the company earns interest on the homeowners money in addition to charging the homeowner a fee that can seem high at times.

The bi-monthly mortgage can be something to watch out for because it is not the same as the bi-weekly mortgage. A bi-monthly mortgage does not have the same results as a bi-weekly one because the homeowner pays half of the monthly mortgage twice instead of every two weeks. This means an extra payment is not made. There is a difference between saving only a single months interest instead of seven years interest.

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Third Party Payment Plans

There are what is called intermediary companies that can set up bi-weekly mortgage payments for the homeowner. The homeowners checking account is debited every other week for the bi-weekly amount, and then the homeowner can send a regular monthly payment to the lender once per year. These intermediary companies will charge a fee to make that extra payment and the fee can be rather large.

There is absolutely no reason to pay a fee for a task that a person can perform on their own using the do-it-yourself method that was explained earlier. If the intermediary becomes bankrupt and doesnt make the payments, the lender will not care if it wasnt t the homeowners fault. It is the homeowners responsibility to make payments on time, even if a third party is the one making them for the homeowner.

No matter how the homeowner does it, making extra payments each year can significantly reduce the amount of interest that the homeowner will pay on their home loan.

Avoid Partial Mortgage Payments

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  • Before you implement a biweekly payment plan
  • Make sure the lender will accept partial payments
  • Or that any extra payments beyond the total amount due
  • Go toward the principal balance

One final note: Be careful not to make a partial mortgage payment to your mortgage lender as it could result in some unintended consequences.

At worst, the mortgage company may send your payment back if its not made in full. This could result in a late fee and a possible credit ding if you dont make the full payment in time.

In other words, making two half mortgage payments a month probably wont go well. But you can always call your lender or loan servicer and ask if you can pay your mortgage every two weeks just to be sure.

For the record, mortgages are generally calculated monthly , so making a half payment early wont result in any additional savings. And 24 half payments is just 12 full payments, so you wont do yourself any favors.

Assuming they do hang onto your partial payment, they may place it in a suspense account, where it will remain until enough money comes along to make at least one full payment.

So if you make another partial or full payment after sending the initial partial payment, theyll only apply the funds if the total is enough to make one full payment.

This is why companies offer biweekly programs to avoid any misunderstanding with your lender if you send in two payments that are supposed to cover your full payment and a surplus toward principal.

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What Are The Drawbacks

Aside from the benefits of a split mortgage, there are some things that you need to consider before you apply, which can include:

  • Missing out on potential interest rate drops on the fixed component of the loan.
  • Paying more on the variable component if the interest rates rise.
  • Additional fees, such as account-keeping costs may be charged on both the fixed and variable sides.
  • You may be charged a break cost on the fixed term portion if you pay out the mortgage early.

Making Biweekly Mortgage Payments

There are some lenders that allow you to automate biweekly payments. This feature makes it easy for you to pay down your mortgage loan faster and for less, without having to even think about the process.

If your lender does not offer such an option, though, youll need to take matters into your own hands. This can be done a handful of different ways heres a look at your three alternatives.

Option 1. You can split your monthly payment in half, logging into your account every two weeks to make a payment. Your savings will be the same as if your lender allows you to schedule biweekly payments.

This option requires you to stay on top of these manual payments, however if you forget to make the second payment one month, you may be charged a late fee by your lender.

Option 2. Automate your regular monthly mortgage payment, taking the legwork out of your lenders requirement. Then, each month you can make an additional principal payment equal to one-twelfth of your monthly amount due at the end of the year, you will have made one extra mortgage payment and significantly reduced your principal balance due.

Option 3. Simply make an additional mortgage payment each year, in the month that works best for you. This one lump payment will go toward reducing your principal balance, though it wont save you as much in interest as if youd made regular contributions throughout the year.

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Goal : Consolidate Your Debt

Until now, weve been assuming that youre refinancing to lower the cost of your mortgage, but many people refinance to consolidate their debt too. In this situation, youre looking to roll high-interest-rate debtsuch as credit card balancesinto your mortgage to simplify your debt payments and lower your interest rate. By doing so, you could reduce your rate from 19%the typical rate on a credit cardto 3% and save thousands of dollars in interest payments.

Thats what Roxanne Saunders did in August 2018. At the time, she had $50,000 in high-interest rate debt on her HBC credit card. Hoping to retire in four years and clean up her finances, Saunders looked at the equity she had in her homeabout $255,000 on a $430,000 condoand renegotiated a $225,000 mortgage at a variable rate of 2.25%.

She says its given her some much-needed breathing room in her monthly budget, paying $600 a month less in total debt payments than before she refinanced. I think Ive put the bank managers children through college with the money Ive spent on interest payments over the years, says Saunders. But I plan to retire at 55, sell the condo and invest in a retirement property outside of the city. This plan works well for me.

How Do You Go About Splitting A Mortgage With Your Partner

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Just like your relationship status, its complicated

There are a whole bunch of ways you could end up contributing to a mortgage beyond the traditional route of joint homeownership with a spouse. Maybe your partner took care of the down payment, but youre splitting the monthly mortgage payments. Maybe theyre already partway through paying off a property, but youve been living there and paying rent for the last few years. Whatever the situation, figuring out who owns how much of a property when formal agreements likely never took place can be a minefield. So were going to try and help navigate it alongside mortgage loan officerRick Sidley, of Cornerstone Mortgage Group.

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Can I Split My Monthly Payment Into Two Installments

Yes, you can make your monthly payment in two installments.

Recurring:

Your account must be current, and it is at least 15 days before your next due date, you can schedule two automatic recurring payments per month. Automatic recurring payments will occur on the same day every month. If you choose to set up bi-monthly payments, you will need to do so at least 15 days before your next due date. Please allow 3 business days for changes to your recurring payments to take effect.

Manual:

If you are not eligible for automatic bi-monthly payments or you prefer to make manual ACH payments, you can make a split payment on your Upstart dashboard by scheduling 2 one time payments using the Make a Payment button.

Savings Add Up With Bi

Consider a traditional 30-year mortgage of $200,000 with an interest rate of 6.5%. Normally, that would require the homeowner to make a monthly payment of $1,264.14. By using a bi-weekly payment plan, the homeowner would pay $632.07 every two weeks and, in doing so, cut six years of payments off of the mortgage loan and save $58,747 off the total amount of the loan.

âA bi-weekly payment plan is far more effective than merely sending one additional payment per year,â says Michael Hausam, a realtor and mortgage broker in Newport Beach, Calif. âYour loan balance accrues interest every day and reducing that principal balance every 14 days saves more in interest charges than one full additional payment every 12 months, even though the total amount in payments every year remains the same.â

Lisa Orban, an author, and an Illinois-based homeowner has been a regular bi-weekly mortgage payment payer since she purchased her residence and has a good reason for the strategy.

âI pay bi-weekly for a number of reasons, but the primary one is almost immediately more money is put towards the principal rather than the interest,â Orban says. âThe payment on the first of the month more goes towards interest, but the payment on the 15th shifts and more money is put towards the mortgage loan principal.â

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