The viability of each payment frequency depends on your own financial cash flow. Use a mortgage payment calculator to calculate the best payment frequency for your needs. Learn more about the different mortgage payment options.
While accelerated bi-weekly and accelerated weekly payments can save you thousands of dollars in interest over the course of a long amortization period, for the majority of Canadians, these payment schedules are not practical. Moreover, paying a mortgage quicker may not be wise if you have higher-interest debt or higher-yielding investment opportunities elsewhere.
As for the difference in interest when comparing monthly, semi-monthly, bi-weekly and weekly payments, it's mostly negligible over the course of the term. For that reason, most new homeowners should simply pick the payment frequency that is easiest for them to manage.
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The following are the most common mortgage payment frequencies. To illustrate how each payment frequency can impact your monthly mortgage payments, let's use the following example:
This is the default and most common mortgage payment schedule. The payment is withdrawn from your account once per month. Therefore, you end up making 12 payments per year.
Based on the example above, each monthly payment would be $1,285.66.
The amount of interest paid over the course of a 25-year amortization period would be $98,699.
Each payment is calculated by taking the monthly payment and dividing by two.
The payment gets withdrawn from your account twice per month (typically the 1st and 15th of the month).
With a semi-monthly payment frequency, you end up making 24 payments per year. Using the mortgage details in the example above, each payment would be $642.50.
Over a 25-year amortization period, you would pay $98,699, which is a savings of $200 in interest versus a monthly payment plan.
Take the monthly payment, divide by two and pay it every two weeks.
Note that each individual payment is higher than the regular bi-weekly payment amount. Choosing the accelerated bi-weekly payment frequency will result in you making one extra monthly payment per year.
Using the mortgage details above, the accelerated bi-weekly payment ends up being $642.83, which is very similar to the semi-monthly payment amount, but you make 26 annual payments, rather than 24. Total interest over the life of the mortgage would total $87,419.
With an accelerated bi-weekly payment frequency, you will pay off your mortgage over 2.5 years sooner (in 22 years and 6 months rather than 25) and save $11,280 in interest versus a monthly payment plan.
Take the monthly payment, multiply by 12 and divide by 52.
This payment structure results in 52 payments per year, or one per week. Using the mortgage details above, your weekly payments would be $296.46, or $98,390 in interest over the life of the mortgage.
Over a 25-year amortization period, you would save $309 in interest versus a monthly payment plan.
Take the monthly payment and divide by four. Then pay every week.
Using the mortgage details above, your weekly payment would be $312.42 and result in $87,298 paid over the life of the mortgage.
With an accelerated weekly payment frequency, you will pay off your mortgage about 2.5 years sooner (in 22 years and 5 months rather than 25) and save $11,401 in interest versus a monthly payment plan.