It’s a proven fact that making biweekly mortgage payments can reduce your mortgage balance faster and reduce the loan period quickly too.

Did you know there are ways your bank can stop your biweekly payments from working for you? You could be diligently paying your mortgage every fortnight, or on the same day every 14 days, yet you’re not getting any further ahead.

This is because banks teach their staff a special language known as ‘Bankese’. This language translates the same way every time. It simply means ‘making more profit for the bank and less profit for you’.

Your real biweekly payments should always be HALF your monthly repayment. To make them work for you, pay them on the same day every 14 days. If your minimum balance is $1,000, then divide this by two and start paying $500 every 14 days. That’s it. It’s not rocket science.

Let’s look at some of the traps your bank can set for your biweekly mortgage payment plans.

Turning Biweekly into Twice-Monthly Payments

You might find that if you ask your bank to change your repayment times to biweekly instead of monthly, they automatically deduct your payments on the 1st and on the 15th of each month and no other time.

Paying your biweekly payments twice a month has no extra effect on paying off your mortgage quickly. You’re paying the same amount of money, so it’s not reducing your balance any faster. You’re also not reducing the loan term at all.

You must be firm about making your bank accept your repayments on a fortnightly basis, not twice a month. The point of paying biweekly is to pay every 14 days. By the end of the year, this method will put you exactly one full monthly payment ahead on your mortgage.

When Biweekly Payments Aren’t Really Biweekly Payments

Some banks are sneaky about calculating your new fortnightly payments their way instead of your way. You both know what your minimum monthly repayment is supposed to be. Grab a calculator and divide this payment amount by two.

When you know how much half your monthly payment is, this is the real biweekly repayment you want to make.

Unfortunately, your banker might think he or she is helping by telling you that there are not 2 fortnights in each month, so they’ll divide it differently for you to save you some money.

This is where they’ll give the following calculation for you:

Let’s say your minimum payment is $1,000. They’ll tell you that annually this adds up to $12,000. There are 26 fortnights in a year, so your real biweekly payments should look like this:

$12,000 divided by 26 = $461.53

If you started paying their version of biweekly payments, then you might find that most months in the year have two fortnights – not three. By paying the bank’s version of your biweekly payments, you’ll pay $461.53 twice. This adds up to $923.06

You’ll remember that we’re working on an assumed example of $1,000 per month as a minimum payment. You would only have paid $923.06 – which means your mortgage is in arrears.

Suddenly your bank is able to charge you default interest rates and penalty fees for not making your minimum monthly payment.

No matter how helpful you feel your bank is being, always do your own calculations. Always insist that your biweekly mortgage payments are happening on the same day every 14 days and then insist that the payments be worked out your way – not the bank’s way.

This is your financial future we’re talking about here, so stand firm, take control and you’ll reap the benefits.