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I have a branch where my mortgage is held, very close proximity to my house. I have extra cash flow on a weekly basis. If I make an extra $500 dollars a week, vs paying $2,000 at the end of the month, will this be reduce my mortgage faster?

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    You need to ask the bank. It depends on how they process those payments. It's possible they treat it as "prepaid principal" and accrue the same amount of interest every month. The benefit is you make 4 extra payments a year (52 weekly payments vs 12 monthly payments)
    – D Stanley
    Commented Mar 8, 2018 at 20:07
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    What country are you in?
    – thelem
    Commented Mar 9, 2018 at 11:26

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Most mortgages (in the US) accrue interest on a monthly basis, and in that case it doesn't matter on what day(s) you make your payment. 4 times per month or once per month will be identical if the totals are equal. It's rare, but some mortgages accrue interest daily (like a credit card) and in that case it would help to make earlier payments if possible.

Also, (mentioned in D Stanley's comment), $500/week does not equal $2000/month. It would have to be $2166.67 per month to be (almost) equal.

As a side note, your idea would help for paying off a credit card that is accruing interest on a daily basis.

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    My mortgage does accrue interest daily, but this is in the UK whereas OP and all answers so far appear to be in the US. Interest, however, is only capitalised annually. I think this is standard in the UK but I've only ever used one mortgage provider so I don't really know.
    – AndyT
    Commented Mar 9, 2018 at 9:49
  • @AndyT - in your case making payments earlier than the due date should actually save you a little bit. I'm not familiar with UK mortgages but I would guess the annual capitalization means that if you're behind on your payments the unpaid accrued interest is tacked on to the principal of the mortgage and a new payment amount is calculated.
    – TTT
    Commented Mar 9, 2018 at 16:28
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    Even in the US it depends and can be complex. E.g. BofA mortgage credits regular payment at the end of the month, but extra principal paid mid-month gets credited on that day, thus reducing interest accrual for the remainder of the month. +1 for emphasizing "most mortgages".
    – void_ptr
    Commented Mar 9, 2018 at 19:11
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    @void_ptr - good comment.That may seem like BofA is offering a benefit there, but this article seems to suggest that the norm would be for extra payments to be applied to the balance of the previous month, and if so BofA is slightly profiting off of the deviation: mtgprofessor.com/a%20-%20amortization/… (search for the paragraph starting with "Borrowers making extra payments")
    – TTT
    Commented Mar 9, 2018 at 19:39
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Ask the mortgage company.

Some people do this. If you do this you will be making 13 monthly payments a year. If they credit is correctly that will shorten the length of the mortgage and save you interest.

What you want to avoid is having to pay a fee for this. In the past some companies would charge a setup fee to allow you to make mortgage payments every two weeks, thus getting 13 monthly payments in the year. The setup fee limited the benefit.

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    ...How do you get 13 payments from every 2 weeks? Shouldn't it be more like 26 payments per year?
    – jpmc26
    Commented Mar 8, 2018 at 23:10
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    1/2 a monthy payment every two weeks equals 13 monthly payments.
    – mhoran_psprep
    Commented Mar 8, 2018 at 23:28
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    Oh, you mean the amount, not the actual act of making a payment.
    – jpmc26
    Commented Mar 9, 2018 at 0:23
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For most regular mortgages, pay a week or two early or pay up to the day before a late fee, and there is no difference in accrued interest.

Most banks will not accept partial payments, but will put them aside until a full payment is pending.

That said, I’d put aside whatever money you wish, and send it once a month with the regular payment. If you intended to go bi-weekly, you’ll just have extra money 2 times per year, and it’s the same as making 13 full payments per year.

I’d add, make sure you are depositing the maximum to your retirement accounts, have no other debt, and have an emergency fund before prepaying the mortgage. Paying down a 4% mortgage is smart, when the alternative is a .01% checking account. Not so good when you are skipping the match on your 401(k) or paying 18% on a credit card.

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  • I've gotten lots of offers from the mortgage holder, and sometimes from third parties, to let me pay every 2 weeks instead of once a month by paying an extra fee. But every mortgage I've ever had has a prepayment clause that says I can prepay any amount at any time with no extra charge. So I can pay a fee to make a prepayment, or I can make a prepayment for free. It baffles me why I should choose to pay for something that I can get for free. I think the last offer I got was a $250 "setup fee" plus $20 per month ... for something I could get for free.
    – Jay
    Commented Mar 8, 2018 at 21:51
  • @Jay It could be because banks are so accustomed to processing payments monthly that they have to make special arrangements to handle other tenors. My lender offered this as an option for free (although they didn't change how interest was accrued). Or they could just be gouging :)
    – D Stanley
    Commented Mar 8, 2018 at 22:05
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    One can do the math, on the bi-weekly vs the 12 payments with the extra 8% or so, and see the difference is minimal. The DIY method gives you most of the benefit along with the opportunity to not make the extra payment if money is tight. Great to keep that flexibility .
    – JTP - Apologise to Monica ♦
    Commented Mar 8, 2018 at 22:05
  • A close relative put hundreds of thousands into their 2.9% mortgage for no other reason than "paying down debts" - I'll never understand the decision to do that over something with a better return - in my area there are funds advertising a guaranteed 4% return (obviously they keep the change...) and when the stock market is running around 8-11%... yikes it hurts my soul a little.
    – corsiKa
    Commented Mar 9, 2018 at 0:18
  • Everyone has their own level of comfort. I wrote an article Retired, With Mortgage in which I described the choice between depositing the money (I don't address the match, these deposits are above that) vs paying the mortgage at a 15 year rate vs 30. At the end of 2014, I had a mortgage balance of $233K, vs $453K (extra) in the 401(k). The mortgage is now $180K. The extra 401(k) balance ended 2017 at $533K. (Let me know if you get a chance to read the article)
    – JTP - Apologise to Monica ♦
    Commented Mar 9, 2018 at 14:19
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As others have noted, mortgage interest usually accrues monthly, so this would make no difference at all.

Even if the interest accrues daily or weekly, it would make only a modest difference. If your mortgage is 5%, I estimate this would save you $6 per month in interest. (Depending on exact dates of deposit, etc.) If you're driving to the bank, you could be paying more for gas, parking, whatever than you'll save. Even if you're walking past the bank anyway so it's just a matter of turning and walking in, is it worth your time for $6? I guess $6 is not totally trivial, but probably not going to change your life, either.

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General opinion seems to be that paying $500 weekly, vs. $2k or so monthly won't make any difference to the overall interest you pay (because it usually accrues monthly). However, I think there is another aspect to consider...

I get the feeling that "I have extra cash flow on a weekly basis" implies your income is somewhat variable and some weeks you have an extra $500 or more "disposable" income to "get rid of", and two options are to pay $500 any week this happens to your mortgage, or leave it in your bank and pay an extra $2,000 at the end of the month (assuming you've had enough "good" weeks).

If that is right, then one potential advantage of choosing to make weekly payments is that by (almost) immediately committing it to the mortgage, there is less temptation/opportunity for you to spend the money on something else. You won't pay the mortgage off any quicker than reliably paying $2k or so extra per month, but you might find you are more reliably making the extra payments.

The above assumes, as JoeTaxpayer notes in his answer, that you have sufficient in an emergency fund (e.g. to cover weeks where you don't make extra) and don't have higher-priority uses for the money (e.g. CC pay-down).

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