June 4, 2025
Choosing a mortgage payment frequency might seem like a minor decision in the grand scheme of things when you are qualifying for a mortgage as it’s often overshadowed by interest rates and down payments. However, the frequency you select—whether monthly, biweekly, or weekly—can significantly influence how quickly you pay down your mortgage and the overall interest you’ll pay. It’s a choice that deserves more consideration, as opting for a more frequent payment schedule can lead to substantial savings in interest costs over the life of your mortgage.
Before we break down each payment frequency, let’s start with a brief summary of the key points of payment frequencies:
- payments are available in the following frequencies: monthly, bi-weekly, semi-monthly, and weekly
- What’s the difference between semi-monthly and biweekly? Semi-monthly cuts your annual mortgage payments in half and spreads it out over 24 equally dispersed payments. A biweekly payment takes that same annual mortgage payment sum and divides it equally by 26 (payments are made every 2 weeks as opposed to simply twice a month). So, biweekly payments are a bit less than semi-monthly payments. But, the outcome regarding interest paid over the course of the year remains the same…nothing lost, nothing gained. The same idea goes with a weekly payment frequency except instead of 26 payments over a year, you are making 52.
- Here’s where things get a bit confusing and where you should seek clarification/confirmation with your lender. We’ve all heard that you pay off your mortgage faster when you choose a biweekly (or weekly) payment frequency, but be aware that not all biweekly payment frequencies are calculated the same way. For instance, most biweekly payment frequencies that are chosen have the same impact against your overall interest charges as though you would have had with a monthly payment frequency. In other words, if you thought you were on a path of paying down your mortgage more aggressively by selecting bi-weekly payments, you may be disappointed to find out that that’s not the case.
- If your intent, by going with a biweekly or weekly payment frequency, is to pay down your mortgage faster, then make sure the word “accelerated” is in front of your chosen payment frequency. Accelerating your payment allows you to dip into your allowable prepayment privilege threshold with your specified lender. Prepayment privileges vary with lenders, they typically range from 10% – 20%, meaning that you are able to over-contribute towards your mortgage payment without penalty, so long as the accumulated surplus amount of your payments do not exceed the specified limit of your overall prepayment privilege limit (10% to 20% of your start mortgage balance). Remember, your mortgage is a predetermined set schedule of payments over an agreed upon amortization (25-30 years).
Monthly Payments:
Monthly payments are the standard choice for many homeowners. They’re straightforward and align well with monthly income cycles.
Semi-Monthly Payments:
Moving on to semi-monthly payments, which occur twice a month, typically on the 1st and 15th. While they align with payday schedules, they don’t reduce interest as much as bi-weekly or accelerated bi-weekly payments because they still result in 24 payments per year.
Bi-Weekly Payments:
Bi-weekly payments involve making payments every two weeks, totaling 26 payments per year. This schedule results in one extra payment annually compared to monthly payments, which accelerates the amortization process slightly.
Weekly Payments:
Weekly payments, while less common, involve 52 payments per year. They can align with weekly paychecks but are more administratively complex and less popular due to the higher frequency.
Weekly Accelerated Payments:
Weekly accelerated payments are another option offered by some lenders in Canada. Similar to accelerated bi-weekly payments, you make payments every week, but each payment is higher than a standard weekly payment. This results in 52 payments per year, effectively adding up to one extra monthly payment annually. It accelerates the reduction of your mortgage principal, leading to faster amortization and greater interest savings.
Accelerated Bi-Weekly Payments:
Now, accelerated bi-weekly payments are a powerful strategy. Like bi-weekly payments, they occur every two weeks, but here’s the kicker: you’re making payments equivalent to half of your monthly payment. This results in 26 payments per year but at a higher amount, effectively adding up to one extra monthly payment per year. This accelerated schedule significantly reduces the principal faster, leading to shorter amortization periods and substantial interest savings.
Comparison and Examples:
Let’s put this into perspective with an example. Suppose you have a $500,000 mortgage at a 4% interest rate over 25 years. Opting for monthly payments would result in paying approximately $335,000 in interest. However, choosing accelerated bi-weekly or weekly accelerated payments could reduce your amortization to about 22 years and save you over $44,000 in interest.
Interest Talking Points:
Accelerated payments not only save money but also build equity faster, providing financial flexibility sooner. It’s essential to consider your budget and cash flow when choosing a payment frequency. While accelerated payments offer significant savings, they require disciplined budgeting.
Closing:
Each payment frequency option has its advantages, but accelerated payments stand out for their ability to reduce mortgage debt faster and save on interest. Remember, selecting the right payment frequency is the first step in the quest to pay your mortgage down faster. Discuss these options with your mortgage broker to find the best fit for your financial goals.
For a deeper dive into their discussion, tune into the episode in the link above!
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