How Choosing the Right Mortgage Payment Frequency Saves You More Money
Mortgage payments can typically be made weekly, accelerated weekly, bi-weekly/semi-monthly, accelerated bi-weekly, or monthly. The more significant difference lies in accelerated payments. With accelerated payments, you make payments every two weeks for bi-weekly and every week for weekly schedule. This means you pay an extra month of mortgage payment every year thereby reducing your amortization period and saving you money in interest rates. The non-accelerated payments just spreads out your payments more if you are using semi-monthly/bi-weekly or weekly, and saves very little money in interest. To calculate how much you can save, you may also use our (accelerated) Bi-Weekly VS Monthly Calculator on the Mortgage Tools section of our site.
Some things to consider when choosing which payment schedule to use are:
- If you are salaried, when do you get paid? If you get paid on the 15th and the 30th, choosing a non-accelerated semi-monthly/bi-weekly payment might be a good idea.
- Do you want to pay off your home sooner? Then choose an accelerated option if you can afford to make the payments that way. You will not only shorten your amortization period, but you will also save money on interest rates.
- Whatever payment schedule you use, you can always pay off your mortgage faster and save on interest payments by making extra principal payment allowable each time you pay or taking advantage of pre-payment privileges you have.
| Payment Rate | Payment Amount | Years to Pay Off Mortgage | Estimated Interest Paid over the Mortgage’s Lifetime |
|---|---|---|---|
| Monthly | $639.87 | 25 years | $91,940.85 |
| Bi-Weekly | $319.90 | 21 years | $74,927.96 |
This example is based on a $100,000 mortgage with a 6% interest rate calculated semi-annually, not in advance, and assumes that the interest rate remains constant for the full 25-year amortization period.
