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Better to Make One or Two Mortgage Payments Per Month?

Is it better to make one or two mortgage payments per month?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

First off, it is important to clarify your question.  Some mortgages, called bi-weekly loans, are set-up to accept payments twice a month, well technically every two weeks.  In short, with a bi-weekly mortgage, you are required to pay your loan every other week, so paying on a monthly basis is not an option.  The required bi-weekly payment is usually half of a comparable monthly mortgage payment so you pay roughly the same amount every month with both programs.  

Bi-weekly mortgages offer multiple advantages relative to monthly mortgages include paying off your loan several years earlier and saving thousands of dollars in interest expense.  The downside of a bi-weekly mortgage is that you effectively make an extra mortgage payment every year, so the financial commitment is greater than for a monthly mortgage.

Review How a Bi-Weekly Mortgage Works

So if you are asking if you should choose a bi-weekly mortgage or a monthly mortgage, we recommend the bi-weekly option as long as you can afford making multiple payments every month and the equivalent of one additional payment annually.   For example, you need to make sure that the timing of when you are paid allows you to make the bi-weekly payments while also taking into account your bills and other financial obligations. 

Now that we have discussed the difference between a monthly and bi-weekly mortgage, we can address if you should make one or two payments per month on a monthly mortgage.  In short, the answer to that question depends on when your lender applies payments to your account.

If your lender only applies principal payments to your mortgage balance one time per month, then paying once a month is the preferred approach because you do not gain financially by paying your mortgage twice a month.  In this case, if your required monthly mortgage payment is $4,000, it does not make much sense to make two payments of $2,000 per month because the "early" payment you make simply sits in your account before it is applied to your balance.

If your lender applies partial payments to your account when they are received, then making two payments per month may provide a moderate financial benefit by paying down your mortgage balance faster and reducing your interest expense over the life of your loan.

If you are considering making multiple mortgage payments -- either twice a month or bi-weekly -- be sure to check with your lender to understand when the payments are applied to your account.  Many lenders only apply payments once a month, even if you make multiple payments, which reduces the benefits of making multiple payments.

We should also highlight that there is a difference between making partial payments and making an extra payment.  Returning to the example above, if your required mortgage payment is $4,000 and you want to make two $2,000 payments per month, these are considered partial payments.  Many lenders do not accept partial mortgage payments.

On the other hand, if you pay your $4,000 monthly payment as scheduled, you can make an additional payment of any amount at any time.  For example, you could send in an extra payment of $1,000, $5,000 or any amount and the lender applies the payment to pay down your mortgage balance.

Paying more than your required payment is also called mortgage acceleration.  Accelerating your loan can shorten the length of your loan and reduce your total interest expense.

Review How Mortgage Acceleration Works

In closing, before you make any changes to how you pay your mortgage, contact your lender to understand how payments are applied to your loan balance.  With this information, you can determine the payment approach that provides the greatest financial benefit based on your loan, lender and individual circumstances.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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