The Biweekly Mortgage: An Equity Builder
John G. Hall*
Staten Island, New York
Over the last 25 years the residential mortgage industry has seen a proliferation of residential mortgage products. There
have been rollover mortgages, adjustable rate mortgages, graduated payment mortgages, reverse annuity mortgages and
a myriad of others.
Over the same period of time there has also been a change in the philosophy of many borrowers. The old philosophy
of the highly leveraged transaction based on an assumption of continuing inflation has been replaced by a philosophy of
trying to build equity and limiting the total amount of interest paid over the life of a loan. Many people have
accomplished this objective by choosing a mortgage term of 15 years rather than 30 years. Others have prepaid an extra
payment once a year or on some other basis. There is, however, a more structured approach, and that is the biweekly
What is a Biweekly Payment Mortgage
A biweekly payment mortgage is a mortgage where half a monthly payment is made every two weeks. It is clear that
there are only 24 semi-monthly payments in a year, whereas each year contains 26 biweekly payments plus one
additional day or, in leap years, two additional days (26 x 14 = 364 + 1 = 365) or (26 x 14 - 364 + 2 = 366).
These two extra biweekly payments are the equivalent of one extra monthly payment or 13 monthly payments a year.
This component of the loan is one of the great savers of interest paid over the life of the loan. Another saver of total
interest paid is the method in which interest accrues on the unpaid balance of the loan and a reverse compounding effect
on that accrual. To illustrate, payments under a $100,000 loan with interest at 12% for a period of 30 years would be as
Original Principal Balance . . . . . . . . . . . . . . . . . . $100,000.00
Interest Accrued as Part of 1st Monthly
Payment of $1,028.61 . . . . . . . . . . . . . . . . . . . . . . .$999.99
Principal Balance after 1st Monthl