Two different products are both called bi-weekly, and they are not close. The accelerated version pays half the monthly amount every two weeks — 26 half-payments, which is 13 full ones a year — and removes years from the loan. The simple version re-amortises the loan over a bi-weekly schedule, so the payment is smaller and 26 of them are only 12 monthly equivalents: the payoff date does not move at all. This calculator does both, and says which is which.
Someone has been told that paying fortnightly shortens a mortgage, wants to know whether that is true and by how much, and wants the numbers before changing how they pay.
A year has 52 weeks, so a fortnightly schedule produces 26 payments. Each is half the monthly amount, so 26 halves make 13 whole monthly payments — one more than a monthly schedule asks for. That thirteenth payment is the entire mechanism.
On a $300,000 loan at 6.5% over thirty years, the monthly payment is $1,896.20 and the biweekly payment is $948.10. Paid monthly, the loan runs the full 360 months and costs $382,633.47 in interest. Paid fortnightly, it clears in 628 payments — 24.15 years — and costs $295,408.08. The term shortens by 70 months, nearly six years.
The timing matters as well as the amount. Each half-payment lands every fourteen days rather than every thirty, so the average balance over the year is slightly lower and interest accrues on less. That is a smaller effect than the thirteenth payment, but it works in the same direction.
Not everything sold as a bi-weekly plan removes any interest, and the difference is not in the schedule — it is in how the payment is calculated. Both versions collect every two weeks, 26 times a year. What differs is what that payment is half of.
The accelerated version takes half the monthly payment. Twenty-six of those make thirteen monthly payments, so a year of payments contains one extra month's worth, and that extra goes to principal. On a $300,000 loan at 6.5% over thirty years the payment is $948.10 and the loan clears in 24.15 years — six years early.
The simple version re-amortises the whole loan over a bi-weekly schedule instead. The payment comes out smaller — $874.76 rather than $948.10 — and 26 of them are exactly twelve monthly equivalents. The loan ends on the same date as a monthly schedule, at the same total interest. Nothing is saved; the only thing that changed is which day the money leaves.
So a servicer offering a "bi-weekly payment plan" may be selling you a change of payment dates and calling it a payoff strategy. The question to ask is whether the payment is half the monthly amount or a re-amortised figure, because the first removes years and the second removes nothing. The plan-type control above switches between them.
The biweekly schedule is not magic. Paying one twelfth extra each month — the same 13/12 of the normal payment — produces almost exactly the same result, and the arithmetic is easier to follow because nothing about the payment dates changes.
On that $300,000 loan, paying 13/12 of the monthly amount clears it in 290 months, against 628 fortnights or 24.15 years for the biweekly version. The two agree to within a couple of weeks, which is the timing effect above. If a lender charges a fee to set up a biweekly programme, the monthly route costs nothing and lands in the same place.
That is worth knowing because biweekly payment programmes are a product some servicers sell. The useful part is the extra payment; the schedule is a delivery mechanism, and often a paid one.
It assumes every payment is made on time and in full, for the whole term. A biweekly schedule has more payment dates than a monthly one, so there are more opportunities to miss one, and a missed payment usually costs a fee and sometimes more.
It also assumes the extra payment is applied to principal. Some servicers hold early payments rather than applying them, which removes no interest at all — the money sits against a future instalment instead of reducing the balance. Worth checking on the first statement after starting.
And it assumes the rate never changes. On a fixed-rate loan the comparison is exact; on an adjustable one the baseline moves and the figures become approximate.
biweekly payment = monthly payment ÷ 2, paid every 2 weeks — 26 payments a year, or 13 monthly equivalents
The whole effect comes from the thirteenth payment. It is not a discount and it is not a different interest rate — the rate is identical. The borrower simply pays more each year, and the extra goes straight to principal, which removes it from every future month's interest calculation.
The monthly payment on $300,000 at 6.5% over thirty years is $1,896.20, so the biweekly payment is $948.10. Paid that way, the loan clears in 628 payments — 24.15 years, or 70 months early — and the interest falls from $382,633.47 to $295,408.08. The rate never changes; the thirteenth payment does all of it.
On $200,000 at 6% over thirty years the monthly payment is $1,199.10 and the biweekly payment is $599.55. The loan clears in 638 payments, which is 24.54 years, saving 66 months. Interest falls from $231,676.38 to $182,513.24. The saving is smaller in months than Example 1 because the rate is lower — the extra payment is worth more when interest is more expensive.
A fifteen-year loan has much less interest to remove. On $250,000 at 5.5% over fifteen years the biweekly payment is $1,021.35 and the loan clears in 346 payments, saving 20 months rather than 70. Interest falls from $117,687.55 to $103,388.59. The mechanism is identical; there is simply less interest left to save.
The identical $300,000 at the identical 6.5% over the identical thirty years, but re-amortised on a bi-weekly schedule rather than accelerated. The payment falls to $874.76 and the loan still clears at 30.00 years, with $382,311.79 of interest — the same as paying monthly, to within rounding. The term saving is zero. This is the case worth checking for, because the payment is lower and the plan still calls itself bi-weekly.
Yes, and the reason is arithmetic rather than a discount: 26 half-payments a year is 13 full monthly payments, so a year of biweekly payments contains one extra month's worth. On a $300,000 loan at 6.5% over thirty years it removes 70 months from the term and about $87,000 of interest.
They are nearly the same thing. Paying 13/12 of the monthly amount — one twelfth extra every month — clears the same loan within a few weeks of the biweekly schedule, because the amounts are identical and only the timing differs. If a servicer charges a fee for a biweekly programme, the monthly route costs nothing.
It should, but not automatically. Some servicers hold an early payment and apply it to a future instalment, which removes no interest. Ask for it to be applied to principal and check the first statement afterwards to confirm.
Because most of a mortgage's interest is charged in its early years, and a shorter loan has fewer of them. On a thirty-year loan at 6.5% the biweekly schedule saves about 70 months; on a fifteen-year loan at 5.5% it saves about 20, with the same mechanism working throughout.