Mortgage Payment Options
Most lenders allow several options for payment frequency. Most will allow you to make payments either weekly, bi-weekly, semimonthly or monthly. When you increase the payment frequency and amount, you reduce the principal faster, pay less interest and pay off the mortgage sooner.
Your mortgage payment frequency options include:
- Monthly - one payment per month for a total of 12 for the year
- Semi-monthly - two payments per month for a total of 24 for the year
- Bi-weekly - every two weeks (monthly payment x 12 divided by 24)
- Accelerated Biweekly - every two weeks (monthly payment divided by 2)
- Weekly - every week (monthly payment x 12 divided by 52)
- Accelerated Weekly - every week (monthly payment divided by 4)
Your payment frequency is set when your mortgage is first arranged, but you may be able to change it afterwards, usually without having to pay a fee.
Accelerated Payment Options
Accelerated weekly and accelerated biweekly payments can save you thousands, or even tens of thousands in interest charges, because you’ll pay off your mortgage much faster using those options.
The reason is that with the “accelerated” options, you make the equivalent of one extra monthly payment per year. Regular weekly and biweekly options do not provide the same benefits.
Comparing Monthly to Accelerated Payments Options
As you can see in the example, 'accelerated' bi-weekly or weekly payments save you a lot of money over the life of your mortgage. By taking your monthly payment, splitting it in half and paying it bi-weekly you end up making an extra month’s worth of payments every year (26 two-week periods). For those who are paid bi-weekly, accelerated biweekly payments are both convenient and a great way to make what equates to one month’s extra payment each year. The example is for a $200,000 mortgage amortized at 25 years at 4.5%.
TIP: Paying down your mortgage faster is simple. The more you pay, the faster it goes down and the less interest you pay in the long run. You can always be mortgage free faster.
Accelerated Payments Calculator - try some calculations if you like!
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