What Is a Bimonthly Mortgage?
A bimonthly mortgage payment is a mortgage plan in which half of the scheduled monthly payment is made twice a month. This plan is not to be confused with a biweekly plan, where half of the scheduled monthly payment is made every two weeks.
Sometimes spelled as “bi-monthly” mortgage payments, these plans are typically set up for the customer to pay on the 1st and the 15th of each month. Under some bimonthly plans, it is even possible to make extra payments on top of the bimonthly ones.
Key Takeaways
- Bimonthly mortgage payments can help homeowners pay less interest on their home loans.
- Bimonthly mortgage payments are subtly different from biweekly mortgage payments.
- Not all mortgage lenders will allow customers to make bimonthly payments. It depends on the lender.
Bimonthly Mortgage vs. Biweekly Mortgage
The difference between a bimonthly plan and a biweekly plan is subtle. In a biweekly plan, payments are made every two weeks—not quite the same as two payments a month, because most months are slightly longer than four weeks.
Specifically, a biweekly plan results in two more payments being made annually than on a bimonthly plan. In other words, 24 payments are made annually on a bimonthly plan, while 26 payments are made annually on a biweekly plan.
That might sound like a small difference, but it can really add up over the course of a mortgage. Just as a bimonthly mortgage can build equity in your property more quickly than a monthly plan, a biweekly mortgage can build equity even more quickly than that. Therefore, these plans are great for people looking to pay off their mortgage as quickly as possible.
Bimonthly mortgage payments may help raise equity in your home faster than a monthly payment.
Pros and Cons of Bimonthly Mortgages
A bimonthly plan might shorten the overall term of the mortgage to a certain degree. Some bimonthly mortgages might come with a higher payment to further reduce the interest and principal balance compared with making regular monthly payments. It may be possible to convert to a bimonthly mortgage when refinancing under a new mortgage, which might be lower to accelerate the payment process.
A bimonthly mortgage plan will result in interest savings over the life of the mortgage. It does this by reducing the mortgage principal as each payment is received, as opposed to the first payment of the month being held by the lender until the second payment of the month is received (at which point the full monthly payment is made).
Under a bimonthly mortgage, breaking up the payments can cut down the interest that would have to be paid. However, the lender may or may not make such a payment option available. Furthermore, a lender might charge additional fees to participate in a bimonthly mortgage plan, which could eliminate any potential savings.
With some bimonthly mortgages, the lender might still hold the first payment—another scenario that would eliminate any potential savings. While such a plan would give the borrower more flexibility in how they pay off a mortgage, it would not result in any fiscal benefit. The terms of any bimonthly mortgage should define when and how the payments will be applied toward the principal balance.
There is debate over how effective bimonthly mortgage plans can be, especially because most mortgage lenders calculate interest as a monthly cost, not a bimonthly cost. So, while it is possible to reduce the overall interest due, the result might only amount to the elimination of one payment or a few.
Are Bimonthly Mortgages the Same as Biweekly Mortgages?
Not quite. Since most months are slightly longer than four weeks, biweekly mortgages that are paid every two weeks result in 26 payments throughout the year. Bimonthly mortgages that are paid on the 1st and 15th of the month will result in 24 payments throughout the year.
Will a Bimonthly Mortgage Help Me Pay Off My Mortgage Faster?
It depends on the terms of your mortgage and whether or not your mortgage lender charges you additional fees to make bimonthly payments. Talk with your mortgage lender or financial advisor before you commit to a bimonthly mortgage in the hopes of paying off your mortgage early.
Will I Be Charged a Prepayment Penalty?
You might face a prepayment penalty depending on your mortgage lender's terms. Before you switch to a bimonthly mortgage, ask about associated fees, since you might not save money in the long run if you're being charged additional fees.
The Bottom Line
If you're eager to pay off your mortgage early, you might consider a bimonthly mortgage, allowing you to make two monthly payments. This can help you build equity in your home. However, you should find out if your lender charges fees for a bimonthly mortgage since these could offset any potential savings.
