When a bi-weekly payment plan is set up, most mortgage servicing companies simply hold the first half of the monthly payment until the second half arrives and then make the full monthly payment. If a simple interest bi-weekly mortgage plan can be set up, each payment received is immediately applied toward to principal balance of the mortgage leading to additional interest savings.
Converting an existing mortgage to a bi-weekly plan usually carries some fees. A self-disciplined borrower can gain the same benefits of a bi-weekly plan by making one additional mortgage payment each year, or by paying an extra amount each month equal to 1/12 of the scheduled monthly payment.
A biweekly mortgage is a simple and effective way for borrowers to decrease their interest costs and pay off their mortgages sooner. In most cases, there are no additional fees or commissions associated with setting up a biweekly mortgage as opposed to a monthly mortgage.