Avoid setting up a bi-weekly mortgage payment plan through your bank. A bi-weekly mortgage payment plan essentially means you make 13 mortgage payments (a half payment every other week for 52 weeks = 26 half payments = 13 whole payments) instead of the 12 mortgage payments you would be making if you paid once a month. The extra payment will go towards the principal, and will allow you to pay off your loan faster. Great, right? Sure, the savings from a bi-weekly payment plan can cut several years off of your mortgage payments, but it often comes at a price – a several hundred dollar enrollment fee, plus additional transaction fees.
If you are paid bi-weekly, you can achieve the same results of a bi-weekly mortgage payment plan (and avoid the fees) by taking half of your mortgage payment out of each check and placing it in a savings account. If you empty out this account every time a mortgage payment is due, you’ll be including the equivalent of an extra half-payment at least two times a year. Be sure to specify that the extra money should go towards the principal.