Most people pay their mortgage once a month. However, some lenders offer different payment options.
These two payment plans are often confused with each other, which leads to even more confusion over what they specifically entail.
Twice a month vs. every other week
With biweekly and bimonthly payment plans, you divide your normal monthly payment in half. The sole difference is when you make that payment.
The prefix “bi” is used differently in each plan.
“Bimonthly” means twice a month—not every two months.
“Biweekly” means every other week.
So with a biweekly mortgage, you’d make payments every two weeks. With a bimonthly mortgage, you’d make payments twice a month (usually on the 1st and the 15th).
They might seem the same, but there’s a difference. To illustrate, let’s do some simple math.
Simple math
There are 52 weeks and 12 months in a year.
If you make a payment every two weeks—a biweekly mortgage—divide 52 by 2. This equals 26 payments a year.
If you make two payments a month—a bimonthly mortgage—multiply 12 by 2. This equals 24 payments a year.
With a biweekly plan, you’ll wind up making more payments—and pay off your mortgage faster.
With a bimonthly plan, you’ll save a little in interest and your payments are more frequent than the standard once a month.
Lenders usually require an automatic bank draft for either option.
Are bimonthly plans worth it?
Not really. The money saved on interest usually amounts to only one or a few months’ payments in savings over the life of the loan. Furthermore, if the lender charges you anything to be able to pay twice a month, it truly isn’t worth it.
What about biweekly payments?
Since you’re making two extra payments per year with a biweekly plan, you’ll pay your loan off much quicker than with a bimonthly plan.
For example, a $250,000 30-year loan with a 4.1% rate paid off biweekly will pay off the mortgage four years early with a savings of almost $30,000 in interest.
Some lenders will collect your biweekly payments and make the monthly payments as normal, saving the rest in another account. At the end of the year they apply the extra payment. Just be sure to not pay anything extra to set up a biweekly payment plan, and plan accordingly for a more frequent mortgage payment.
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