When it comes to your mortgage there are several payment frequencies you can choose from. The payment frequency refers to how often you will make mortgage payments. Not all payments offer savings on interest or will help you pay down your mortgage faster. Here is a simple breakdown of each payment type to help you choose the option that most suits your situation.

 

Monthly Payments:
These are the most common way of making mortgage payments. Most people prefer monthly payments because of their simplicity, especially if you are used to making monthly rent payments on the first of each month. You don’t even have to make your payments on the first of the month. You can ask your lender to set up your payments on a day that is more convenient for you as long as it is the same date every month. If your payments are $1,000 per month then you’ll be making $12,000 in payments each year. The equation is easy, just take your monthly payment amount and multiply by the twelve months of the year. $1,000 x 12 = $12,000
However, monthly mortgage payments offer little to no savings on interest.

Semi-Monthly Payments:
These payments are made twice a month, usually on the first and fifteenth. Payments are exactly half of the monthly amount. If your monthly payments are $1,000 then you will be paying $500 twice a month. $500 x 24 = $12,000
Same as with monthly payments, this option saves you next to nothing on interest. You are paying the same amount yearly just at different intervals.

Bi-weekly Payments:
The bi-weekly payment option allows you to make the same amount of payments as the semi-monthly and the monthly payments. Your $1,000 payments is multiplied by 12 then divided by 26 (half of 52, the amount of weeks in a year). $1,000 x 12 / 26 = $461.54
In the end you’re still paying $12,000 per year and savings almost nothing.

Bi-weekly Accelerated Payments:
Every two weeks you will be paying half of your monthly amount. Let’s say your monthly payments are still $1,000 then you will be paying $500 every fourteen days. At least twice a year you will be making three payments in one month. In the end you’ll be saving big time because you’ll be making an extra payment of $1,000 over the year.
$500 x 26 = $13,000
The amount of interest is the same therefore, the additional $1,000 payment gets deducted from the balance owing on your mortgage. With a bi-weekly accelerated payment option you are making a small deduction from the mortgage balance because you’ll be making payments faster than if they were larger monthly payments. This plan works wonders for paying down your mortgage faster. It is easy to up-keep, especially if you receive a pay cheque every two weeks.

Weekly Payments:
The $1,000 monthly payment is multiplied by 12 then divided by 52 making your weekly payment $230.77. $1,000 x 12 / 52 = $12,000
The savings from weekly mortgage payments are slim to none because like the other payment options, with the exception of the bi-weekly, you are still paying $12,000 per year.

Weekly Accelerated:
The concept of weekly accelerated payments is that you make your payments on the same day every week, exactly every seven days. Your payment amount is calculated as follows; a quarter of your monthly payment amount is multiplied by the number of weeks in a year. $250 x 52 = $13,000
As with bi-weekly accelerated payments you will reap huge savings by paying an extra $1,000 per year which is deducted from your mortgage balance. At least five times a year there are five weeks in one month. This leads you to make five payments in those particular months.

The chart below shows you exactly how much you would save with accelerated payment options.

	Monthly	Semi-Monthly	Bi-Weekly Accelerated	Weekly Accelerated
Payment Amount	1000.00	500.00	500.00	250.00
Amortization Years	25	24.9	20.58	20.50
Interest Paid	157,227.49	156,085.48	124,238.29	123,850.05
Interest Saved	none	1,142.01	32,989.20	33,377.44

We recommend choosing an accelerated payment option; you’ll pay down your mortgage faster and collect colossal savings.