Should I pay my mortgage every 2 weeks instead of every month?

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Kavin KuykendallPro Member
Rental Property Investor · Panama City · Member since 2017 · 53 posts · 21 votes
7y

@Samuel Chua

As stated above, it depends what your goals are. But in my opinion the payoff is huge simply by splitting your monthly payment into two bi-weekly payments. Here’s some math:

Loan Amount: $250,000

Interest rate: 5.0%

Term: 30 years

If a homeowner in the above scenario made bi-weekly payments of $671.46 ($1454.82/month) the difference comes out to:

Paying off the loan in 25 Yrs 3 Mts (4 Yrs 9Mts faster)

A total monthly payment of $1,454.82 rather than $1,342.05 ($112.77 more per month)

$189,453.43 in interest paid rather than $233,139.46 (a savings of $43,686.43)

That’s a savings of $43,686.43 and almost 5 years of your life for an additional $112.77 a month.

Again it depends on your goals. If you need the cash now more than later, don’t worry about it. That’s the purpose of a loan. But if you’re into the long term, loan pay down/interest savings. It’s definitely a viable option.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    If you can afford the extra payment, I would do it.

    0Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    7y

    @Samuel Chua

    It all depend what your goal is.

    If you want to get rid of the debt as soon as possible, then yes, it will save you a few years on your payments. But then why not paying more than that too?

    If your goal is to have cash on hand for other investments, then no, you want to drag your mortgage as long as you can to keep maximum cash on hand and pay only the minimum allowed.

    0Reply
  • Dave G.
    Investor · Phoenix, AZ · Member since 2016 · 349 posts · 418 votes
    7y

    You can't expect any meaningful feedback with so little information on your situation provided. 

    It's like asking "what tool should I use to work on my car?" providing no more information.

    0Reply
  • Brent Shields
    Rental Property Investor · Sacramento · Member since 2019 · 129 posts · 108 votes
    7y

    I can give you my strategy...  I look at what are my other options with the money. 

    So if I have a loan that I am paying 4% interest on, and the next best thing I can find to do with the money pays me less than 4% then I would pay the loan down.

    If I have another opportunity that pays me 20% then I would pay a little on the 4% loan as possible and put all my money in the 20% return option.

    If your money is just sitting in your checking account at 0% or .1% interest then I would pay as much as I reasonable could on the loan.

    It comes down to looking at all your loans and investment opportunities and ranking them in order, then put your money where it will do you the most good.

    4Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    It depends on your investment goals. If your goal is to hoard money you have no use for at the lowest possible return you dump as much as you can into a mortgage. Mortgages on rental properties is where cash goes to die.

    If you want to maximise your returns the last place you want it is sitting dead all in one property when your tenants are actually paying for the property. This not only is a waste of cash it places you at a liability risk and at risk of loss if markets drop.

    1Reply
  • Ashley Zhang
    Accountant · CO · Member since 2018 · 195 posts · 23 votes
    7y

    Or do you mean the same amount of payment split into two payments? for example your current payment is 1000 per month, you are thinking pay 500 by the end of the 2nd week, and 500 at the end of the month? I am not sure if this will help pay off the loan and save some interest. would like to hear from someone else. 

    0Reply
  • Scott Anderson
    Rental Property Investor · AZ · Member since 2018 · 212 posts · 183 votes
    7y

    Has anybody actually done the math here?

    You’re saving 15 days of interest on $500. 

    At 5% interest (which is high)... you save $1.00

    $1.00 amortized for 30 years is about $2.00. And that’s just for your first payment. Every payment after saves you less.

    I’ll keep the time spent thinking about it and amortize my $1.

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    No, the “magic” in paying a half payment every two weeks (26 times a year) means you are paying 1extra payment each year. If you want to do that, simpler just to pay an extra $1,000, or whatever you want, once a year, or as often as you desire.

    2Reply
  • Kavin KuykendallPro Member
    Rental Property Investor · Panama City · Member since 2017 · 53 posts · 21 votes
    7y

    @Samuel Chua

    As stated above, it depends what your goals are. But in my opinion the payoff is huge simply by splitting your monthly payment into two bi-weekly payments. Here’s some math:

    Loan Amount: $250,000

    Interest rate: 5.0%

    Term: 30 years

    If a homeowner in the above scenario made bi-weekly payments of $671.46 ($1454.82/month) the difference comes out to:

    Paying off the loan in 25 Yrs 3 Mts (4 Yrs 9Mts faster)

    A total monthly payment of $1,454.82 rather than $1,342.05 ($112.77 more per month)

    $189,453.43 in interest paid rather than $233,139.46 (a savings of $43,686.43)

    That’s a savings of $43,686.43 and almost 5 years of your life for an additional $112.77 a month.

    Again it depends on your goals. If you need the cash now more than later, don’t worry about it. That’s the purpose of a loan. But if you’re into the long term, loan pay down/interest savings. It’s definitely a viable option.

    7Reply
  • Samuel Chua
    OP
    Singapore · Member since 2019 · 78 posts · 9 votes
    7y
    Originally posted by @Kavin Kuykendall:

    @Samuel Chua

    As stated above, it depends what your goals are. But in my opinion the payoff is huge simply by splitting your monthly payment into two bi-weekly payments. Here’s some math:

    Loan Amount: $250,000

    Interest rate: 5.0%

    Term: 30 years

    If a homeowner in the above scenario made bi-weekly payments of $671.46 ($1454.82/month) the difference comes out to:

    Paying off the loan in 25 Yrs 3 Mts (4 Yrs 9Mts faster)

    A total monthly payment of $1,454.82 rather than $1,342.05 ($112.77 more per month)

    $189,453.43 in interest paid rather than $233,139.46 (a savings of $43,686.43)

    That’s a savings of $43,686.43 and almost 5 years of your life for an additional $112.77 a month.

    Again it depends on your goals. If you need the cash now more than later, don’t worry about it. That’s the purpose of a loan. But if you’re into the long term, loan pay down/interest savings. It’s definitely a viable option.

     Thanks for replying! However, what if I used the double payment a month method but instead, sell the property in 5-7 years? This is because I will not have enough capital to invest in my second property so for this entire 5-7 years, my cash flow would be stuck. Hence, would you recommend this method or would you advise me to take another path. Thanks!

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    You shouldn’t be paying ANY of your mortgage . That’s the tenants job to do monthly !

    1Reply
  • Kyle McKnett
    Real Estate Agent · West Chester, PA · Member since 2018 · 63 posts · 46 votes
    7y

    @Wayne Brooks If that’s the plan people want to use I like to add one small step. Take whatever your monthly payment is and divide it by 12. Add whatever that amount is to your monthly payment. You’ve now made 13 payments over the year but in smaller increments which makes it easier to swallow for most people.

    0Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    @Samuel Chua I wouldn't personally want to hassle with sending a payment every 2 weeks. If you want to pay down your principal just increase your monthly payment. Easy-peasy-lemon-squeezy. 

    1Reply
  • David M.
    Rental Property Investor · Scottsdale, AZ · Member since 2018 · 49 posts · 44 votes
    7y

    @Samuel Chua

    As was mentioned above, bi-weekly payments add a full payment every year, so part of the faster pay down is more money paid in the same amount of time.

    If you are worried about cash in 5-7 years why not see what a home equity line of credit (HELOC) at 75-80% loan to value can unlock for you. Or if rates decrease in 5-7 years, even a cash out refi? It's hard to say what the right play would be in half a decade without seeing market trends and conditions. Sale will trigger capital gains which remove a lot of the benefit of paying off more, unless you 1031 the proceeds. Good luck!

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    7y
    Originally posted by @Samuel Chua:

    Should I pay my mortgage every 2 weeks instead of every month? Will my slight decrease of cash flow be worth it? Thanks!

     These plans usually charge $395 to $500.  No way.

    Just add 1/12 extra to each monthly payment for the same effect.  Will cut a few years off of a typical 30yr mortgage.  

    Nobody optimizes EVERY extra dollar of disposable income.  I'd do the extra $100 or so monthly just to do it.  You won't pay off the mortgage a few years early and regret it.  It's over already?  Dang it. LOL

    1Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
    7y

    I echo what Russel said in his first post, but if I assume your goal is mortgage paydown (for whatever reason), I wouldn't lock myself into 2 week payments.  What I'd do is just pay extra each month based on the extra cash you have.  That way, if you have some months with big expenses and you don't want to pay extra on the mortgage, you have that option.  Just paying extra principal when you have the cash accomplishes the same thing (plus the extra amount can differ based on that months expenses.

    Locking yourself into 2 week payments means you're doing it whether you want to or not.  So keep the monthly payment going and just pay extra principal in those months where you have the cash to do so.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Ashley Zhang:

    Or do you mean the same amount of payment split into two payments? for example your current payment is 1000 per month, you are thinking pay 500 by the end of the 2nd week, and 500 at the end of the month? I am not sure if this will help pay off the loan and save some interest. would like to hear from someone else. 

     there are 52 weeks in a year and 12 months.. so if you pay every two weeks your going to pay more than if you pay monthly its why those that rent motels by the week make a killing..  it will save in interest. 

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    1Reply
  • Bjorik Mutize
    Real Estate Broker · Minneapolis, MN · Member since 2016 · 530 posts · 398 votes
    7y

    @Samuel Chua I’d reinvest that extra payment towards either future property improvements/expenditures/operations or towards your next investment.

    I get the faster pay down but why. I’m assuming you have good terms on your debt, long-term? I’d save your capital.

    2Reply
  • Samuel Chua
    OP
    Singapore · Member since 2019 · 78 posts · 9 votes
    7y
    Originally posted by @Bjorik Mutize:

    @Samuel Chua I’d reinvest that extra payment towards either future property improvements/expenditures/operations or towards your next investment.

    I get the faster pay down but why. I’m assuming you have good terms on your debt, long-term? I’d save your capital.

     Thanks for replying to my post! However, if I save my capital, it will just be sitting there doing nothing until 5 years till I sell my property so that I can reinvest again. Do u have any advice on this? Thanks!

    0Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    @Jay Hinrichs I feel a boost of confidence since the almost all knowing Jay Hinrichs just voted for a post of mine for the very first time I think. Jay, thank you for sharing your experience so freely and candidly here on BP. I always appreciate you input since it comes from a very wide range/big picture/longterm perspective. One could probably earn an honorary PHD in investing by reading all of Jay's input here on BP. Thanks again Jay for contributing so much value to all of us who are still learning the ropes and beyond. Now if I could just get a ride in your plane...😆   

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Brian G.:

    @Jay Hinrichs I feel a boost of confidence since the almost all knowing Jay Hinrichs just voted for a post of mine for the very first time I think. Jay, thank you for sharing your experience so freely and candidly here on BP. I always appreciate you input since it comes from a very wide range/big picture/longterm perspective. One could probably earn an honorary PHD in investing by reading all of Jay's input here on BP. Thanks again Jay for contributing so much value to all of us who are still learning the ropes and beyond. Now if I could just get a ride in your plane...😆   

     OK now I am blushing.. but thank you for the kind words keep in mind there are plenty of other great investors on BP.. and i am far from perfect I have my dud's or misjudge someone  etc.. 

    But back to how to pay mortgage down.. I do the same when i get a mortgage I set it up auto pay and usually round up to the next thousand and pay at least 500 a month extra.. this saved my bacon in 2010 after being hammered so badly in the GFC.. I had a lot of equity I could fall back on.. 

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    1Reply
  • Samuel Chua
    OP
    Singapore · Member since 2019 · 78 posts · 9 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Brian G.:

    @Jay Hinrichs I feel a boost of confidence since the almost all knowing Jay Hinrichs just voted for a post of mine for the very first time I think. Jay, thank you for sharing your experience so freely and candidly here on BP. I always appreciate you input since it comes from a very wide range/big picture/longterm perspective. One could probably earn an honorary PHD in investing by reading all of Jay's input here on BP. Thanks again Jay for contributing so much value to all of us who are still learning the ropes and beyond. Now if I could just get a ride in your plane...😆   

     OK now I am blushing.. but thank you for the kind words keep in mind there are plenty of other great investors on BP.. and i am far from perfect I have my dud's or misjudge someone  etc.. 

    But back to how to pay mortgage down.. I do the same when i get a mortgage I set it up auto pay and usually round up to the next thousand and pay at least 500 a month extra.. this saved my bacon in 2010 after being hammered so badly in the GFC.. I had a lot of equity I could fall back on.. 

     Thank you for replying! May I know if you used hard cash or tenant cash when paying that extra $500. Thanks!

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Samuel Chua:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Brian G.:

    @Jay Hinrichs I feel a boost of confidence since the almost all knowing Jay Hinrichs just voted for a post of mine for the very first time I think. Jay, thank you for sharing your experience so freely and candidly here on BP. I always appreciate you input since it comes from a very wide range/big picture/longterm perspective. One could probably earn an honorary PHD in investing by reading all of Jay's input here on BP. Thanks again Jay for contributing so much value to all of us who are still learning the ropes and beyond. Now if I could just get a ride in your plane...😆   

     OK now I am blushing.. but thank you for the kind words keep in mind there are plenty of other great investors on BP.. and i am far from perfect I have my dud's or misjudge someone  etc.. 

    But back to how to pay mortgage down.. I do the same when i get a mortgage I set it up auto pay and usually round up to the next thousand and pay at least 500 a month extra.. this saved my bacon in 2010 after being hammered so badly in the GFC.. I had a lot of equity I could fall back on.. 

     Thank you for replying! May I know if you used hard cash or tenant cash when paying that extra $500. Thanks!

    both because you don't always get tenant cash each and every month.. you have a turn over and u usually lose a month .. you have a bad tenant does not pay you..  

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Samuel Chua
    OP
    Singapore · Member since 2019 · 78 posts · 9 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Samuel Chua:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Brian G.:

    @Jay Hinrichs I feel a boost of confidence since the almost all knowing Jay Hinrichs just voted for a post of mine for the very first time I think. Jay, thank you for sharing your experience so freely and candidly here on BP. I always appreciate you input since it comes from a very wide range/big picture/longterm perspective. One could probably earn an honorary PHD in investing by reading all of Jay's input here on BP. Thanks again Jay for contributing so much value to all of us who are still learning the ropes and beyond. Now if I could just get a ride in your plane...😆   

     OK now I am blushing.. but thank you for the kind words keep in mind there are plenty of other great investors on BP.. and i am far from perfect I have my dud's or misjudge someone  etc.. 

    But back to how to pay mortgage down.. I do the same when i get a mortgage I set it up auto pay and usually round up to the next thousand and pay at least 500 a month extra.. this saved my bacon in 2010 after being hammered so badly in the GFC.. I had a lot of equity I could fall back on.. 

     Thank you for replying! May I know if you used hard cash or tenant cash when paying that extra $500. Thanks!

    both because you don't always get tenant cash each and every month.. you have a turn over and u usually lose a month .. you have a bad tenant does not pay you..  

     Thanks!

    0Reply
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