How to Calculate Biweekly Mortgage Payments

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A Step-by-Step Tutorial
Tutorial 15

Biweekly mortgages are popular with some borrowers because they reduce the total interest paid compared to a conventional mortgage with monthly payments. Each biweekly payment is one-half of the standard monthly amount and is made every other week. This creates 26 payments per year, which is equivalent to 13 monthly payments. Because the principal is reduced more often, less interest accrues over the life of the loan.

All users should complete the more detailed first tutorial to understand the basic concepts and settings of the Ultimate Financial Calculator (UFC).

Follow these steps to create a biweekly amortization schedule:

Set Schedule Type to Loan.
- Alternatively, click the button to clear any previous entries.
Click , then select Rounding Options. Set “Rounding” to Adjust last amount to reach “0” balance.
In the header section, make the following settings:
1. For Calculation Method, select Normal.
2. Set Initial Compounding to Monthly.
3. Enter 6.25 for Initial Interest Rate.

In row 1 of the cash‑flow input area, create a Loan series.
1. Set the Date to December 1, 2016.
2. Set the Amount to $375,000.00.
3. Set the # Periods to 1.
  - Note: Since the number of periods is 1, you will not be able to set a frequency. If a frequency is entered, it will be cleared when you leave the row.
Move to row 2 of the cash‑flow input area.
1. Select Payment for the Series.
2. Set the Date to January 1, 2017.
3. Set the Amount to Unknown by typing U.
4. Set the # Periods to 360.
  - Payments are initially calculated as if based on a 30-year loan.

Your screen will look like this (Fig. 1):

Biweekly mortgage setup — Fig. 1—Initial biweekly mortgage calculation.

Click . The result is $2,308.94 for the regular monthly payment. See Fig. 2.

Prepare to calculate the biweekly term:
1. In the header, reset Initial Compounding to Biweekly. See Fig. 3.
2. Click row 2 in the cash‑flow input area.
3. Confirm that the Series is already set to Payment.
4. Reset the Date to December 15, 2016 (the first biweekly due date).
5. Reset the Amount to $1,154.47. This is one-half of the monthly payment calculated in Step 6.
6. Reset the # Periods to Unknown by typing U.
7. Reset the Frequency to Biweekly. (See note below.)

Your screen will look like this (Fig. 3):

Biweekly mortgage 2nd calculation — Fig. 3—Unknown number of biweekly payments.

Click to compute the unknown number of periods. The result is 632 biweekly payments.
- Although the number of payments has increased, the overall loan term has shortened. See Fig. 4.

Biweekly mortgage result — Fig. 4—Biweekly loan payoff date: February 21, 2041 vs. December 1, 2046.
(See “End Date” in Fig. 2.)

View the amortization schedules to verify the early payoff under the biweekly plan and evaluate the interest savings. In this example, the borrower saves just over $100,000 in interest—approximately 20%.

NOTE: When the payment frequency matches the compounding frequency, there is no additional interest due to unpaid interest. That is, changing the compounding frequency to Biweekly when using biweekly payments does not increase the total interest paid.

This tutorial shows one way to set up a biweekly mortgage calculation. You may need to adjust the steps to match your specific situation. The calculator supports any cash flow scenario. If you need assistance, post your question in the comment area at the bottom of the calculator page.

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