What is the result of a bi-weekly payment plan for a mortgage?

The concept of a bi-weekly payment plan for a mortgage significantly impacts how the total loan is structured. When a borrower opts for a bi-weekly payment plan, they make payments every two weeks rather than once a month. This results in 26 payments being made over the course of a year, which equates to 13 full monthly payments instead of the standard 12.

This practice means that the borrower is effectively making one extra monthly payment each year. This additional payment is applied directly to the principal balance of the loan, which is why this option is the correct answer. By reducing the principal faster through this additional payment, it can significantly decrease the total interest paid over the life of the loan, helping borrowers pay off their mortgage more quickly.

It's essential to note that while making extra payments does contribute to reducing the overall term of the loan and can impact how quickly the borrower builds equity, the primary result of a bi-weekly payment plan is the accumulation of that extra monthly payment annually.