Real Estate Savings Strategies: Extra Payments

Biweekly Mortgage Payment vs Increased Principle Payment

Boise Dream Home with Guest House

Which one saves you more money, A Biweekly Mortgage Payment or a Principle Payment Increase?

When you add a monthly payment equal to 1/12 of the your regular monthly payment, or make biweekly payments, both result in making the equivalent of one full extra monthly payment a year.

But what many people don’t know is:

Bi-weekly Payment: With a biweekly, it takes a year before additional payments are made to your principal. Only then do you begin saving on interest. It takes a year for biweekly payments to add up to an extra payment. During that year, your money accumulates in an account on which you receive no interest.

Principle Payment: If however, you increase the monthly payment, principal is reduced starting in the first month, and interest savings begin in the second month.

Going back to our $200,000 5% mortgage example you save yourself about $2,500 by going with the extra principle payment vs. the biweekly.  Likely even more if your bank charges set up fees and monthly fees for doing the biweekly plan. Most banks have fees for this service.

Learn more about how interest rates save you money!

For more information contact:
Mark Knight
(208) 577-1487
Fabulous Idaho Real Estate


  • Jamie

    Another advantage of principle payment is flexibility! If this month I have some extra money–I can throw it in. If next month I have a big unexpected medical bill, I can just pay the basic payment. I set up an autopay through my bank to pay $100 extra every month, but I am more confident doing so knowing that if things get tight, I can just drop back to the basic payment for a few months until I catch up. Sometimes I get an extra check for overtime work–and I can just add that to my monthly payment without making special arrangements with my mortgage carrier.

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