You may have seen ads that say, “Pay off your mortgage years early!” These are usually ads for companies promoting a bi-weekly mortgage program. 

 

There is no “magic” here, it’s just simple math. Normally you make 12 payments per year to your lender. In a bi-weekly plan, you pay half of your normal payment every two weeks. There are 52 weeks, so that’s 26 half payments, which means you are paying the equivalent of 13 payments each year. The extra goes to reduce your principal (some lenders require you to tell them to apply it to the principal or they’ll hold it in a “suspense” account). The company will charge you several hundred dollars to administer it for you, but you save thousands in interest. 

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