Bi-Weekly payment programs, are they a good idea?

With bi-weekly payment programs the lender or a 3rd party servicer will typically charge $200-$400 to sign up for the program. They will then automatically draw one half of your total monthly payment every 2 weeks and apply it to your mortgage. The reason that a bi-weekly plan pays down your mortgage quicker than the regular amortization schedule is NOT because you’re making the payment any earlier in the month but because you are making 13 payments per year (there are 52 weeks in a year, 26 bi-weekly periods, and therefore 13 total payments made).

With that said, keep in mind that you can create this very same impact by simply making one extra payment per year or by increasing your monthly mortgage payment by 1/12th of your principal and interest payment. For example, if your monthly principal and interest payment is $1,200 per month then you could add $100 per month (1/12th of $1,200) and have the same impact as the bi-weekly payment program without signing up or paying a fee.

The other consideration to make is how important is it for you to pay down your mortgage? Are their other financial objectives that deserve more attention or are better choices (i.e. retirement savings, investing for kids college education, paying down other debts, building a savings reserve fund, etc.).