Mortgage Payment Frequency Options

Your mortgage payments consists of both the principal and an interest component, paid on a regular basis during the term of the mortgage.  Refers to how often and when you can make these payments.

The Mortgage Payment Options

  • Monthly (any day of the month usually between the 1st and 28th
  • Weekly (any day of the work week, 52 payments per year)
  • Bi-Weekly (every other week, 26 payments per year)
  • Semi-Monthly (twice per month, 24 payments per year, e.g. on the 1st and 15th of each month
  • Plus accelerated weekly and bi-weekly

What is an accelerated bi-weekly payment?

  • Accelerated Bi-Weekly payments are exactly half of a regular monthly payment amount BUT it is collected every two weeks
  • This means you make 26 payments per year
  • For example, if the monthly payment is $1,000 then the accelerated bi-weekly payment will be $500
    • If you paid monthly you would pay $1,000 x 12 months = $12,000 per year
    • Paying accelerated bi-weekly you would pay $500 x 26 = $13,000 per year
  • This results in you paying an extra $1,000 off your mortgage each year – hence accelerating how fast you pay it back!
  • Remember, twice a year you will have three payments in one month
  • Accelerated weekly refers to monthly payment divided by 4!

What is a non-accelerated bi-weekly payment?

  • Non-accelerated is taking the regular monthly payment and times by 12 months, then
  • Divide this into 26 payments
  • For example, if the monthly payment is $1,000 then the non-accelerated bi-weekly payment will be $461.54
    • If you paid monthly you would pay $1,000 x 12 months = $12,000
    • Paying non-accelerated bi-weekly you would still pay $12,000 = $461.54 x 26 = $12,000
  • This results in you not paying any extra off your mortgage each year – hence non-accelerating
  • Remember, twice a year you will still have three payments in the one month

Now, let’s compare the payments and savings between these two options; regular monthly and accelerated bi-weekly payments:

$250,000 mortgage with a 25 year amortization at 3.39% 5 Year Fixed Term

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So how do you select the right one for you?

  • Determine which payment option you actually qualify for
  • Review what payment options the lender offers
  • Consider aligning your payment frequency with how often you get paid each month e.g. if you are paid every two weeks, then consider accelerated bi-weekly payments to align with each pay cheque
  • The more often you pay, the less interest you will pay
  • You can always adjust this at any time and change

My recommendation: Pay accelerated bi-weekly if you can afford it, as it forces you to pay more.  By paying your mortgage off sooner you will reduce your debt and save unnecessary interest – plus a forced savings plan for the future! I can be reached at 519-760-4391 or melissa@melissabendo.com