How to Calculate Biweekly Mortgage Payments

A Step-by-Step Tutorial
Tutorial 15

Biweekly mortgages are popular with some borrowers because they reduce the amount of interest due when compared with a conventional mortgage that has monthly payments. Why? The payment amount is 1/2 the periodic monthly payment and it is paid every other week. This results in 26 payments a year, or the equivalent of 13 monthly payments. The impact of this is principal is prepaid and therefore the amount of interest paid is less than it otherwise would be.

All users should work through the more detailed first tutorial to understand the Ultimate Financial Calculator's (UFC) basic concepts and settings.

To create a bi weekly amortization schedule, follow these steps:

  1. Set "Schedule Type" to "Loan"
    • Or click the [New] button to clear any previous entries.
  2. Set "Rounding" to "Adjust last amount to reach "0" balance" by clicking on the {Settings} {Rounding Options}
  3. In the header section, make the following settings:
    1. For "Calculate Method" select "Normal".
    2. Set "Initial Compounding" to "Monthly".
    3. Enter 6.25 for the "Initial Interest Rate".
  1. In row one 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 set, it will be cleared when you leave the row
  2. Move to the second row 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"
    4. Set the "# Periods" to 360. Payment are first calculated as if they are based on a 30-year loan
  • Your screen will look like this (Fig. 1):
Biweekly mortgage setup
Fig. 1 - Initial biweekly mortgage calculation
  1. Calculate the unknown. The result is $2,308.94 for the regular monthly payment. (Fig. 2)
Biweekly mortgage setup
Fig. 2 - Expected monthly payment
  1. Prepare to calculate the biweekly term
    1. Reset the "Initial Compounding" in the header to "Biweekly." Fig. 3
    2. Click on second row of the cash flow input area
    3. The Series will already be "Payment"
    4. Reset the "Date" "December 15, 2016 (first biweekly due date)
    5. Reset the "Amount" to $1,154.47 or half the value of the monthly payment calculated in Step 6 above
    6. Reset the "# Periods" to "Unknown"
    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
  1. Calculate the unknown number of periods. The result is 632 biweekly payments
    • While the number of payments has increased, the term of the loan has decreased. Fig. 4
Biweekly mortgage result
Fig. 4 - Biweekly loan payoff date February 21, 2041 vs December 1, 2046.
(See "End Date" in Fig. 2)
  1. View the amortization schedules to see the early payoff for the biweekly loan and evaluate the interest savings. In this case, the borrower will realize just over a $100,000 savings in interest expense or about 20%

NOTE: When the payment frequency is equal to the compounding frequency there is no impact on the payoff as a result of changing the compounding. That is, there is no additional interest as a result of unpaid interest. Thus setting the compounding to "Biweekly" when biweekly payments are made does not have a negative impact on the total amount of interest paid.

This tutorial illustrates one way to set up a calculation for a biweekly mortgage. You may need a variation of what is shown here. The calculator will support any cash flow scenario. If you need assistance, please ask your question in the comment area at the bottom of the calculator page.