Updated: May 5, 2020
What is Payment Frequency?
Have you ever wondered why you should pay your Mortgage Bi-Weekly or Monthly?
Many clients ask us whether they should pay their mortgages Weekly, Bi-Weekly or Monthly. The most common question though is just about Bi-Weekly or Monthly payments and whether it will make a difference to their Mortgage.
The short answer is “No”. It makes no difference as both methods come to the same amount over the course of the year.
It does make a difference, however, if you do what is called an “Accelerated Bi-Weekly Payment”. This is the common payment frequency chosen by someone who wants to pay their Mortgage down quicker. Essentially, you divide your monthly payment in two and this would be your new bi-weekly payment. However, since there are 26 bi-weekly periods in the year as opposed to 24, you end up making two extra bi-weekly payments by the end of the year. This works out to be a full extra monthly payment each year towards your principal; therefore, reducing your mortgage faster and reducing the amount of interest you pay.
Hopefully, this helps when making a decision on how to pay your mortgage, and if you have any further questions please don’t hesitate to reach out.