Payment frequency explained

Understanding mortgage payments

When you make more frequent mortgage payments, you are paying more towards your principal, thus, saving you thousands in interest and shortening the amount of time it takes to pay off your mortgage. The following table shows how a $1,000 mortgage payment is managed with different payment schedules.

Option Formula Payments per year Amount per payment Total paid per year
Monthly $1,000 ÷ 1 12 $1,000 paid once per month $12,000
Semi-monthly $1,000 ÷ 2 24 $500 paid twice per month $12,000
Bi-weekly $1,000 x 12 ÷ 26 26 $461.54 paid every second week $12,000
Accelerated bi-weekly $1,000 ÷ 2 26 $500 paid every second week $13,000

 

Monthly payment options
Payment frequency Description
Monthly A monthly mortgage payment is when your mortgage payment is withdrawn from your bank account on the same day of every month. With a monthly mortgage payment, you make 12 payments per year.
Semi-monthly A semi-monthly mortgage payment is structured to be paid on two dates per month, such as the 1st and 15th. You would make 24 payments per year.
Weekly payment options
Payment frequency Description
Bi-weekly A bi-weekly mortgage payment is when your mortgage payment is multiplied by 12 months and divided by the 26 pay periods in a year. With a bi-weekly mortgage payment, you make 26 payments per year, every 14 days.
Accelerated bi-weekly Your payment is made every second week, and because there are 52 weeks in a year, you make 26 payments. The payment amount is calculated by dividing your monthly mortgage payment by two and the amount is withdrawn from your bank account every two weeks. This results in making the equivalent of one extra monthly payment every year. You make a payment every 14 days.