After the thrill of buying your dream home comes the reality of paying your mortgage. Most people stick with the traditional monthly loan payment plan, not realizing the time- and money-saving benefits of the biweekly mortgage payment strategy.
Many people wrongly assume that making biweekly mortgage payments means they’ll be paying twice as much in mortgage payments. That’s not correct. In fact, the additional amount each month amounts to about 1/12th of your regular monthly payment: If your payment is $1,200 a month, you’ll pay about an extra $100 a month.
If you like the idea of saving money and extinguishing debt quickly, let’s take a closer look at the biweekly payment plan and how using the AutoPayPlus™ biweekly mortgage calculator can show you the way to save big on your home loan.
How AutoPayPlus Biweekly Payments Work
With the AutoPayPlus™ biweekly mortgage plan, you’re debited one-half of your regular monthly mortgage payment every two weeks. Since there are 52 weeks, 26 half payments will be withdrawn from your account, and it will add up to one extra monthly payment to principal per year, shortening the lifespan of your loan and decreasing the total amount of interest paid over time. You can use those extra debt-free years to more fully enjoy life or you can put money away to build financial security for the future.
You can schedule automatic biweekly payment withdrawals with AutoPayPlus. And you can add in more payments in addition to the biweekly payments so you pay off your loan even faster and save even more on interest.
How to Use the AutoPayPlus Biweekly Mortgage Calculator
It’s easy — go to our Biweekly Mortgage Calculator and follow the simple steps to enter your loan information. Let’s use an example of a mortgage of $250,000 for 30 years at 4.25% interest.
Enter 250000.00 for the full Loan Amount, 30 years for the term (or put in the number of months until your loan matures) and 4.25 for the interest. In the second column, be sure to enter the exact date that your loan starts, or the date it started if it’s an existing loan. Then hit the calculate button to see your results — you can pay off the loan 52 months early and save more than $30,000!
The results show your monthly payments, debt-freedom date and interest saved. Clear the fields and play with different scenarios to see how adding extra payments beyond biweekly can dramatically increase your savings on interest and get you out of debt even more quickly.
You can use the calculator to help determine when you can drop private mortgage insurance (PMI) — the costly insurance your lender makes YOU pay for to protect THEM when you put less than 20% down on your home.
When applying for the loan, you can request that PMI be dropped when you have paid down your mortgage to 80% of the bank’s appraised value (they are required to drop it when you’ve paid down to 78%). Biweekly mortgage payments can help by enabling you to eliminate PMI faster.
Here’s how to use the AutoPayPlus calculator to help figure out when you can ask your lender to eliminate PMI:
- Multiply the lender’s appraised value of your home by .80 (ex: appraised value of $200,000 x .80 = $160,000. This is your threshold value to drop PMI.
- Run the AutoPayPlus Mortgage Savings Calculator with your loan amount and interest rate (ex: $200,000 at 4.25% interest).
- Click on the amortization schedule button that appears after your results.
- Use the slider to see when you will have reached the threshold value of remaining principal to drop PMI (in the example above, you would have $160,000 in principal remaining between 2024 and 2025 with biweekly payments — versus between 2026 and 2027 with a traditional payoff schedule).
Note that some lenders may have additional requirements, such as a waiting period for newer loans, or they may require an updated appraisal or proof that there are no other outstanding liens on the property. Be sure to contact your mortgage holder for any other requirements they might have to cancel PMI on your loan.
AutoPayPlus can help you pay down debt faster. Withdrawals from your account every other week fit conveniently with paychecks and your monthly budget, while an extra half payment twice a year toward principal reduces interest over the life of the loan. Please visit our website to learn more.