Payment Frequencies Explained

One of the decisions you’re going to have to make when you get a mortgage is how often you want to make your payments. With constant demands on your cash flow, you’ll want a way of fitting your payments into your bill payment landscape. Lenders give you a choice of up to six payment frequencies for so that you can choose when and how often you wish to make your regular payments.

• Monthly (12 payments/year)
• Semi-Monthly (24 payments/year)
• Bi-weekly (26 payments/year)
• Weekly (52 payments/year)
• “Accelerated” bi-weekly (26 payments/year)
• “Accelerated” weekly (52 payments/year).

The first four alternatives are ways to make payments fit conveniently with your cash flow. The accelerated alternatives allow you to make extra payments against your principal as part of your regular payment stream.

You actually end up making one extra monthly payment against your mortgage each year by using an accelerated payment option. But you do so in such small amounts that the extra payment easily fits into your cash flow.

With the accelerated bi-weekly frequency, instead of dividing the total annual payment amount by 26, it is divided by 24 (as if the payments were being made on a semi-monthly frequency). However, you still make 26 payments during the year.

So, if your monthly mortgage payment is $1,000 and you use a bi-weekly frequency, your payments would be $461.54: $1,000 x 12 / 26 = $461.54 x 26 = $12,000

However, if you choose the accelerated bi-weekly frequency, your payments would be $500 and you would make one extra monthly payment for a total of $13,000 a year: $1,000 x 12 / 24 = $500

$500 x 26 = $13,000

By making the accelerated bi-weekly payments, you actually make two extra payments a year (which translates into 13 monthly payments instead of 12). Those extra payments reduce your principal, so you save on your interest costs in the long term.

The accelerated weekly payments work in much the same way except that instead of dividing the total annual payment amount by 52, it is divided by 48 (as if the payments were being made on a monthly basis divided by four weeks).

However, you still make 52 payments during the year.

Consider getting in touch with me today to determine what payment frequency is best for you OR you can download my app and calculate them for yourself!

Book a Call now to discuss your options.