To begin, let’s understand the frequency of biweekly mortgage payments in comparison to others as we’ve noticed this can sometimes be confusing:
- Monthly mortgage payments: 12 payments per year (on the same date each month)
- Biweekly mortgage payments: 26 payments per year (exactly every 14 days)
- Semi monthly mortgage payments: 24 payments per year (on the 15th and last day of each month)
- Accelerated biweekly mortgage payments: 26 payments per year based on a payment which is ½ of monthly payment (exactly every 14 days)
We’ve had so many clients ask us to explain the pro’s and con’s of biweekly mortgage payments vs. monthly mortgage payments, but the truth is it’s really a personal preference. This personal preference usually involves factors such as your work pay schedule, other unrelated finances and payment schedules, supplementary income, etc. Comfortability is another huge factor. Some clients will feel more comfortable with one large monthly mortgage payment, while others will find it easier to maintain smaller biweekly mortgage payments every two weeks coordinated with their work payment schedule. Whatever floats your boat!
We can discuss the real pro’s once we get into the topic of ‘accelerated payments’. Accelerated weekly or accelerated biweekly mortgage payments involve making either 52 weekly or 26 biweekly payments. The payments however are calculated differently to make extra payments toward your mortgage that go straight to paying down principal:
Accelerated biweekly mortgage payments: Calculated by taking the monthly payment and dividing by 2, but made every 14 days (26 times per year). If you calculate this annual amount, it’s actually 2 payments more than the regular biweekly mortgage payments would amount to.
Accelerated weekly mortgage payments: Calculated by taking the monthly payments and dividing by 4, but made every 7 days (52 times per year). If you calculate this annual amount, it’s actually 4 extra weekly payments than the regular weekly mortgage payments would amount to.
To sum things up, the true pro’s and con’s of any payment frequency really comes down to personal preference. On the other hand, if you opt in for accelerated payments, you’ll benefit by making some extra payments per year that go straight to principal which could pay your mortgage off years sooner. To find out how much sooner, what the payment differences are for your specific mortgage or to get a better understanding of the information shared in this blog, contact us today – we’d be happy to spend the time going over these options.