Monthly Payment Vs Bi weekly payment, which one will save you more interest?

The frequency of your mortgage payment is a topic that often gets discussed amongst First-time home buyer and even perhaps those with investment property mortgage rate holders.

With many believing if you choose a biweekly payment frequency you are bound to save a ton of interests and repay the mortgage quicker.

I guess this stems from a belief that because you are making more regular payments on a bi weekly basis Vs monthly therefore you are paying more of your mortgage off quicker.

In this blog I want to address this misconception by going over both options.

Lets say your monthly mortgage payment is $2,000.00 a month so if you are making your mortgage payments on a monthly basis you will pay $24,000.00 towards your mortgage in a 12 months period.

$2,000.00 x 12 (monthly payments) = $24,000.00

Now should you choose to go bi weekly payment frequency for the exact same mortgage and same term your payments amount will be $923.08, bear in mind there are 26 bi weekly payments in a year. In other words:

$923.08 x 26 (Bi weekly payments) = $24,000.00

As evidence above, whether you make your mortgage payments on Monthly, Bi weekly or weekly, make no difference in the amount paid towards your mortgage and thus no actual saving on interest or repaying your mortgage quicker.

However, if you choose to make your regular payments as accelerated payments, that’s where on average you can repay your mortgage quicker and save yourself thousands of $ in interest.

Accelerated payment allows you to pay one extra monthly payment in a year and it would look something like this in the same mortgage scenario as above:

$2,000.00 / 12 = $166.67 add to your regular monthly payments

$2,000.00 / 26 = $76.92 add to your regular bi weekly payments

Accelerated Monthly payments of $2,166.67 or accelerated bi weekly payments of $1,000.00 will be the monthly or bi weekly payments that you will make going forward.

Most lenders allow you to change your payments from regular to accelerated and if it fits your budget, it’s a great method to repay your mortgage quicker and subsequently save interest on your mortgage.

 

When it comes to mortgage frequency payments,

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