As a homeowner with a mortgage, you have options when it comes to how your payments are scheduled. If your goal is to pay off your mortgage quickly, payment frequency is something you should consider. While monthly mortgage payments are a popular option for Canadians, other options are also available that can help you pay your mortgage down faster, including bi-weekly and accelerated bi-weekly payments.
Read on to find out how different payment frequencies compare, particularly when it comes to becoming mortgage-free sooner rather than later.
Key Points
- Several mortgage payment frequencies are available, including monthly, bi-weekly, and accelerated bi-weekly payments, among others.
- You’ll end up paying the same amount at the end of the year with either a monthly or bi-weekly payment schedule, though you may pay slightly less in interest overall with the bi-weekly option.
- Accelerated payment options will help you pay off your mortgage faster and save thousands in interest.
How Do Mortgage Payments Work?
Mortgage payments are typically split into two parts: principal and interest. The principal is applied towards the balance of the loan, while the interest is the cost of borrowing money from the bank.
When you first start paying a mortgage, a larger portion of your mortgage payments go towards the interest. But as the loan matures, the balance between the interest and principal shifts. Eventually, a larger share of the payments will go towards the principal.
Bi-Weekly Payments Vs. Monthly Mortgage Payments
The payment frequency you choose will impact the amount of time it will take for you to fully pay off your principal, as well as the amount of interest you’ll pay over the term and amortization period. Several payment frequencies are available, but some of the most popular ones are monthly and bi-weekly payments.
Bi-Weekly Payments Vs. Monthly Mortgage Payments Example
| Payment Frequency | Number of Payments In A 5-Year Term | Payment Amount | Total Interest Paid In A 5-Year Term | Total Principal Paid In A 5-Year Term | How long to pay off mortgage? |
| Monthly | 60 | $2,269.82 | $88,812.76 | $47,376.59 | 25 years |
| Bi-Weekly | 130 | $1,047.03 | $88,766.26 | $47,347.80 | 25 years |
What Are Monthly Mortgage Payments?
Monthly mortgage payments are the most common option among borrowers. With this payment schedule, you make one payment every month for a total of 12 payments per year. For example, if your mortgage payment is $2,269.82 per month, you’ll pay $27,237.84 in total over a year.
Though paying once a month is convenient for many homebuyers, one drawback is that it’s the slowest way to pay off your mortgage. Because of that, you may pay more in interest over the life of the loan.
What Are Bi-Weekly Mortgage Payments?
Bi-weekly payment schedules involve making one payment every two weeks, for a total of 26 payments per year. Many homeowners receive a paycheque twice a month, so using this payment plan allows them to time their incoming cash flow with their mortgage payments.
With bi-weekly payments, your total amount paid in one year adds up to be the same amount as monthly payments. Each 2-week payment is calculated by adding up what 12 months’ worth of monthly payments would equal in one year, then dividing by 26.
So, in the case of the monthly payment example above, $27,237.84 for the year would work out to ~$1047 every two weeks.
What Are Accelerated Bi-Weekly Mortgage Payments?
Bi-weekly accelerated payments are like bi-weekly payments in that you make 26 payments per year. However, with a bi-weekly accelerated schedule, the amount you pay each period is slightly higher. This is the main difference between accelerated bi-weekly vs bi-weekly payments is the payment amount and schedules.
| Bi-Weekly | Accelerated Bi-Weekly | |
| Payment Amount Formula | (Monthly Payment x 12) ÷ 2 | Monthly Payment ÷ 2 |
| Number Of Payments in a year | 26 payments | 26 payments |
| How much do you pay in a year? | Equivalent to 12 monthly payments | Equivalent to 13 monthly payments |
To illustrate how each payment frequency can impact your principal and interest paid, we’ll use an example assuming the following:
| Bi-Weekly | Accelerated Bi-Weekly | |
| Number of Payments In A 5-Year Term | 130 | 130 |
| Payment Amount | $1,047.03 | $1,134.91 |
| Total Interest Paid In A 5-Year Term | $88,766.26 | $87,145.18 |
| Total Principal Paid In A 5-Year Term | $47,347.80 | $60,318.26 |
| How long to pay off mortgage? | 25 years | 21.5 years |
Mortgage Repayment Tricks
Aside from choosing an accelerated payment schedule, other ways to save on interest costs and pay your mortgage off sooner include the following:
Lump Sum Payments
If your mortgage contract allows it, you may be able to make a lump sum payment towards the principal portion of your mortgage once per year, outside of your regular mortgage payments. Depending on your lender and your mortgage agreement, you may be able to make an additional payment of anywhere from 10% to 20% of the value of your original principal each year. You may even be able to split up these payments throughout the year rather than making one lump sum payment.
Utilizing this prepayment privilege is a wise move if you can afford it, as it can knock years off your mortgage and save you a tremendous amount in interest. The rules governing prepayments vary from lender to lender, so be sure to check your mortgage agreement for details. Further, make sure there are no mortgage prepayment penalty fees associated with paying your mortgage off early, as these fees could end up costing a few extra thousand dollars.
Shortened Amortization At Renewal
When it comes time to renew your mortgage, you may want to consider renewing at a shorter amortization period, which can shave years off your mortgage and save you thousands in interest. Just keep in mind that a shorter amortization period typically means much higher mortgage payments.
No Closing-Cost Refinance
A no-closing-cost refinance is a type of refinancing that doesn’t require payment of closing costs. That means you could save on costs such as loan origination fees, appraisal fees, registration fees, legal fees, and others.
Keep in mind that although you’re not responsible for paying closing costs upfront with this option, these expenses don’t simply disappear. Your lender will account for the expenses in one of two ways:
- By adding them to your mortgage balance
- By increasing your mortgage interest rate
Depending on your lender’s policy, you may be allowed to choose the option you prefer. Realize, though, that whatever option you select will increase your mortgage payment’s size, so ensure you can handle the extra amount that’s tacked on.
No-closing-cost refinancing is beneficial if you expect to stay in your home for only a few years, as little interest will accrue on the mortgage. Once you sell your home, you could realize thousands in saved interest costs. If you intend to live in your home for an extended period, you’ll likely end up paying much more than if you settled the closing costs as an upfront lump-sum payment.
Other Types Of Mortgage Payments
| Payment Frequency | Number of Payments In A 5-Year Term | Payment Amount | Total Interest Paid In A 5-Year Term | Total Principal Paid In A 5-Year Term |
| Semi-Monthly | 120 | $1,134.33 | $88,769.59 | $47,349.85 |
| Weekly | 260 | $523.54 | $88,746.34 | $47,335.42 |
| Accelerated Weekly | 260 | $567.17 | $87,145.18 | $60,393.27 |
Semi-Monthly
Semi-monthly payments are made twice a month for a total of 24 payments per year. Each payment is calculated by dividing the monthly payment by two.
So, if your monthly payment is $2,268.66, you would divide this figure by two to get $1,134.33 per payment. In total for the year, you would pay $27,223.92.
How Long Would It Take To Pay A Mortgage?
A semi-monthly payment schedule requires 600 payments to pay off the loan amount, which would take 25 years.
Weekly
A weekly mortgage payment frequency requires you to make regular payments every week. The payment amount is determined by multiplying your monthly payment by 12 and then dividing it by 52. You’ll make a total of 52 payments per year under this payment plan.
Continuing with our example, if your monthly payment is $2,268.66, this translates to 52 payments of $523.54 each.
While contributing payments every week may seem like a sure-fire way to quickly extinguish your mortgage, it’s nearly identical to making monthly payments. At the end of the year, your total payments still equal $27,224.08.
While you benefit from decreased interest costs, these savings over the long run are negligible. Weekly mortgage payments won’t shave any meaningful time off your mortgage.
How Long Would It Take To Pay A Mortgage?
A weekly payment schedule requires 1,300 payments to pay off the loan amount, which would take 25 years.
Accelerated Weekly
Accelerated weekly payments commit you to 52 payments per year, so they’re similar to regular weekly payments. The difference is that under an accelerated weekly plan, each payment is slightly higher, somewhat like accelerated bi-weekly payments.
The accelerated weekly payment amount is calculated by dividing your monthly payment by four. For example, if your monthly payment is $2,268.66, then this would result in a weekly payment of $567.17. If you make 52 of these payments, your annual total will be $29,492.58.
A weekly accelerated plan allows you to make the equivalent of one extra monthly payment per year. Much like bi-weekly accelerated payments, you’ll save a significant amount in interest costs and pay your mortgage off sooner.
How Long Would It Take To Pay A Mortgage?
An accelerated weekly payment schedule requires 1,122 payments to pay off the loan amount, which would take about 21.5 years.
Bottom Line
Before you decide which mortgage payment schedule to choose, consider what you can comfortably afford and your financial goals. Ultimately, bi-weekly and monthly payments mean you’ll be paying the same amount by the end of each year. The biggest difference is that your payments will be split up and made more frequently on a bi-weekly schedule. Any differences in amounts paid towards principal and interest are negligible. If your goal is to save on interest and pay your mortgage off faster, consider accelerated payment options.
Mortgage Payment FAQs
Do you save more interest with bi-weekly payments over monthly payments?
What’s the difference between regular and accelerated mortgage payments?
What’s an amortization schedule?
How long does it take to pay off a mortgage in Canada?
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