Payment Process

• In a bimonthly mortgage the lender requires the borrower to make two payments each month. Interest is calculated and applied to each payment, but principal is also paid off. This structure allows the borrower can save money by making more frequent payments. When the principal is paid down more often, the interest it creates will also dwindle, creating a lower interest charge as time goes on. The money a borrower can save with this structure is slight.
  
  

Payment Accounting

• In a bimonthly mortgage, the lender will require 24 payments a year, with the first payment of each month usually due on the 15th. If the payment is skipped, the lender can count the debt as late and eventually change the mortgage status to defaulted. Lenders also have control over when these payments are actually applied to the mortgage account. If lenders only apply the payments at the end of month instead of twice during the month, there will be no different from a traditional loan. Borrowers should make sure that lenders apply each payment as it is made.
  
  

Extra Payments

• Some bimonthly payment plans require 26 payments a year instead of 24, effectively adding another month's worth of payment into each year. While this creates a greater financial strain for the borrower, it also ends up saving even more interest and can be advantageous by the end of the mortgage. Lenders know that a 26-payment schedule will reduce their interest and may require fees to change a traditional mortgage into this format.
  
  

Bi-Weekly Plans

• A bimonthly mortgage should not be confused with a bi-weekly mortgage. A bi-weekly schedule requires a borrower to make full, monthly payments on the loan every two weeks. With the normal monthly payments compressed into such a short time period, the mortgage can often be paid off years early, saving a large amount of money on interest.