Simply put, your mortgage payment frequency refers to how often you make your payments. Depending on your unique needs and mortgage goals, increasing your payment frequency (beyond the average monthly payment) can lead to some serious savings and help you become mortgage-free a whole lot faster.
Here are your options:
Monthly Payments
Monthly payments are a standard frequency among many homeowners. With this option, borrowers pay the same amount once a month, every month, amounting to 12 full payments annually.
Example: $1,500 (monthly payment) x 12 months = $18,000 per year
Pros: Predictable payments, every month throughout the year
Cons: The length of time between payments allows more interest to accrue and will not help you pay your mortgage off faster
Semi-Monthly Payments
In short, semi-monthly payments are your regular monthly instalments divided by two. Instead of paying once a month, the semi-monthly frequency allows borrowers to pay half the amount, twice a month, amounting to a full 24 payments annually.
Example: $1,500 ÷ 2 = $750 x 24 = $18,000 per year
Pros: The same predictable annual amount except, by shortening the amount of time between payments, you’ll save on interest over the lifetime of your loan
Cons: Semi-monthly payments won’t help you pay your mortgage off faster
Bi-Weekly Payments
Unlike semi-monthly payments which see funds withdrawn twice a month (only), the bi-weekly schedule allows homeowners to pay their mortgage every two weeks. Under this frequency, borrowers can expect to pay more often than the semi-monthly schedule, but payments are slightly reduced.
Example:
Ex: $1,500 ÷ 26 = $57.69 x 12 = $692.30 (bi-weekly payment) x 26 payments = $18,000 per year
Pros: The same predictable annual amount, ideal for homeowners with a bi-weekly pay schedule and looking to save on interest over the lifetime of their loan
Cons: Bi-weekly payments won’t help you pay your mortgage off faster
Bi-Weekly Accelerated Payments
Similar to regular bi-weekly payments, the accelerated bi-weekly frequency results in 26 payments a year. The exception here, however, is that you’ll pay exactly half your monthly mortgage amount, every two weeks (without the slight reduction in payments as offered by the non-accelerated version). Under this option, homeowners will benefit from one additional mortgage payment every year.
Example: $1,500 ÷ 2 = $750 x 26 payments = $19,500 per year
Pros: Ideal for homeowners with a bi-weekly pay schedule, looking to save on interest and pay their mortgage off faster
Cons: Two extra instalments, twice a year (i.e. $2,250 vs. the regular $1,500)
Weekly Payments
Under the weekly payment frequency, your regular monthly payment is multiplied by 12 (months of the year) and then divided by 52 (weeks of the year). This schedule allows homeowners to pay a fraction of their monthly mortgage every week (the same predictable amount every month) while accruing a small amount of savings in interest.
Example: $1,500 ÷ 52 x 12= $346.15 x 52 payments = $18,000
Pros: Ideal for homeowners on a weekly pay schedule looking to save on interest over the lifetime of their loan
Cons: Weekly payments won’t help you pay your mortgage off faster
Weekly Accelerated Payments
Weekly accelerated payments operate under the same principle as bi-weekly payments in that homeowners will pay their mortgage off faster and with less interest. With this option, borrowers will be expected to pay every week (every seven days) throughout the year, amounting to a full, extra mortgage payment every 12 months.
Example: $1,500 ÷ 4 = $375 x 52 payments = $19,500 per year
Pros: Ideal for homeowners with a weekly pay schedule, looking to save on interest and pay their mortgage off faster
Cons: One extra instalment, four times a year (i.e. $1,875 vs. the regular $1,500)
For more information on payment frequencies, how they work and which option is right for you, give us a call or take a moment to fill out our quick and easy online application form!
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