When finalizing your mortgage, you’ll need to decide which payment option to choose. The option you choose will determine how much and how often you’ll pay. There are 5 different payment options to choose from:
MONTHLY – mortgage payment is withdrawn from your bank account on the same day of every month (i.e. on the 1st), which means you make 12 payments per year.
BI-WEEKLY – monthly mortgage payment is multiplied by 12 months and divided by the 26 pay periods in a year. As a result, you make 26 payments per year.
ACCELERATED BI-WEEKLY – monthly mortgage payment is divided by two and the amount is withdrawn from your bank account every two weeks. With an accelerated bi-weekly mortgage payment, you still make 26 payments per year but the payment amount is slightly more than a regular bi-weekly mortgage payment.
WEEKLY – monthly mortgage payment is multiplied by 12 months and divided by the 52 weeks in a year for 52 payments in the year.
ACCELERATED WEEKLY – monthly mortgage payment is divided by four and the amount is withdrawn from your bank account every week. With an accelerated weekly mortgage payment, you still make 52 payments per year but the payment amount is slightly more than a regular weekly mortgage payment.
What is the difference between regular and accelerated payments?
With an accelerated payment option, you end up making roughly one extra payment a year. It’ll cost you a little more on a monthly basis, but it will save you thousands in interest and help you pay off your mortgage even sooner. It’s this accelerated option that puts you in the direction of paying off your mortgage faster. But it’s important to consider your cash flow and the kind of life style you want to live while paying off your mortgage. If you feel as though accelerated payments would put too much pressure on your budget, then this might not be the best option for you.
Paying off your mortgage faster:
In addition to using accelerated payments to pay your mortgage off faster, you can also use your prepayment options, which include lump sum payments and increasing your mortgage payment. Your mortgage contract will specify how much you can prepay each year.