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Biweekly Accelerated Mortgage Payments

One of the most precious assets that you are likely to possess as you progress through life is your home. Owning their own homes is something that most Canadians strive for.

Unfortunately, for the vast majority of people, one of the major drawbacks in owning a home is the long-term mortgage that must be paid off. Mortgages often stretch out 25 years with more interest and then principal repayments being applied.

Most mortgage payments are made on a monthly basis. However, arranging to make biweekly-accelerated payments can have a dramatic effect on the amount of money you have to pay and the time frame before it is all paid off.

Under a biweekly mortgage, instead of making the payments once a month, you make half the payment every two weeks. If your mortgage is $1,000 per month, under a biweekly system it would be $500 every two weeks.

You make 26 payments per year, which is the equivalent of 13 monthly payments rather than 12. The extra payment is than taken directly off the principal, reducing the payment schedule accordingly.

The effect of biweekly mortgage payments can be dramatic. For example, if you currently have a $150,000 mortgage loan at 7.5 percent fixed interest, you will have paid approximately $330,000 at the end of 25 years. Thatís a $180,000 in interest!

However, if you use a biweekly payment system, you will pay $290,000 and have it completely paid off in just 20 years. You save a staggering $40,000 and you pay the loan off 5 years earlier!

In some situations, the savings using a biweekly payment schedule can save you nearly half of what it cost to buy the house in the first place. And, biweekly payments are especially good if you are locked in at a high interest rate. The chart below shows the same mortgage as the example above; only at a higher interest rate.

Comparison chart of monthly vs. biweekly payments
(Calculation based on a $150,000.00 mortgage at 9% interest amortized over 25 yrs.)
Payment scheduleEach paymentTotal interestTotal savingsPaid off
Monthly payments
(12 per year)
$1,241.97 $222,586.73 none 25 years
Biweekly payments
(26 per year)
$620.98 $163,748.21 $58,838.51 19.5 years

An increasing number of mortgage companies are now offering a biweekly payment option. It is even possible to convert your current monthly payments into a biweekly schedule.

Some companies will attempt to charge you to refinance the loan. However, this is not always the case and shopping around can save you money in refinancing charges.

Be wary of independent companies offering to do this for you for a fee ó you can do it for yourself by simply phoning your lender or contacting us.

You should receive professional financial advice when considering switching to a biweekly mortgage payment schedule.

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Last Updated
Monday, August 20, 2018

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