Mortgage  Question?
Should I Overpay or Refinance a Bi-Weekly Mortgage?

I am halfway through my bi-weekly mortgage and am thinking about refinancing or overpaying my loan to pay it off faster. If I double the overpayment amount why does it not double the amount of time or money I save by overpaying.

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

I recommend that you use our Bi-Weekly Mortgage Acceleration Calculator to evaluate different overpayment scenarios. To answer your question, the dollar amount by which you accelerate your mortgage is not proportional to the amount by which the length of your mortgage is reduced on a 1:1 basis. Simply put, if you overpay an example mortgage by $100 and that reduces the length of that mortgage by one year, that does not mean that overpaying that mortgage by $200 reduces its length by two years. This is due to how mortgage amortization works and because your mortgage payment is comprised primarily of interest expense instead of principal over the first half of your mortgage term. For example, if you overpay your mortgage at the halfway point of your term (which is what you are suggesting), the overpayment has relatively little impact on the amount of interest due for each required payment. The amount of time by which you reduce your mortgage when you overpay it depends on the interest rate, mortgage term and principal balance of the mortgage. In other words, doubling the amount by which you overpay a mortgage payment (from $125 to $250 in your case) is only one factor that determines the the length by which your mortgage is reduced. I hope that clarifies your question.

I also encourage you to use our Bi-Weekly Mortgage Refinance Calculator compare your existing loan and payment to a new mortgage and payment and to determine how long it takes to breakeven if you refinance. Based on the information you have provided it probably makes more sense to overpay your current loan and not refinance but our calculator can help you evaluate your options.

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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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