You will be required to make consistent mortgage payments when you buy a house and take out a mortgage. The mortgage payment frequency choice you select will determine how much and how often you pay. There are five main mortgage payment choices available in Canada: weekly, accelerated weekly, accelerated bi-weekly, monthly, and bi-weekly. 

The customary monthly mortgage payment schedule is common in Canada. However, what if there was a method to pay off your mortgage more quickly and maybe save thousands of dollars on interest? Let me introduce bi-weekly mortgage payments, a growing approach due to its possible economic advantages.

Navigating Mortgage Payment Options: Frequency Matters

Selecting a mortgage payment plan in Canada is a significant choice that will affect your finances all the way through the loan duration. Let’s examine a few common mortgage payment choices:

  • Monthly Payments: This is the typical method, where payments are taken out of your account once a month. There will be 12 installments per year, providing a clear and regular payment schedule.
  • Bi-weekly: Your mortgage payment is calculated as follows: multiply it by 12 months and divide the result by the 26 pay periods in a year to get a bi-weekly payment. When you pay your mortgage every two weeks, you total 26 payments annually, or every 14 days. There are two variations:
    • Standard Bi-weekly: Monthly payment is divided by 26 pay periods.
    • Accelerated Bi-weekly: Half of the monthly payment is allocated to bi-weekly payments, which are somewhat higher. You make 26 payments a year since your payment is made every other week and there are 52 weeks in a year. Your monthly mortgage payment is divided by two to determine the payment amount, which is deducted from your bank account every two weeks. As a result, each year the equivalent of one more monthly payment is made. Every fourteen days, a payment is made. 
  • Weekly: Payments are made every week (52 times a year). Similar to bi-weekly, there are variations:
    • Standard Weekly: Monthly payment is divided by 52 weeks.
    • Accelerated Weekly: Monthly payment is divided by four, resulting in slightly higher weekly payments.

Key Points

  • Bi-weekly and weekly options increase the payment frequency compared to monthly. This can be beneficial for some borrowers who prefer to make smaller payments more often to stay on top of their finances.
  • Accelerated versions of bi-weekly and weekly involve slightly higher payments compared to their standard counterparts. This is because they effectively make an extra mortgage payment each year. While the payment amounts might be slightly higher, the total amount paid towards the principal increases, potentially leading to a faster mortgage payoff.

Potential Benefits of Bi-Weekly Mortgage Payments

Although the choice to move to bi-weekly payments is dependent on your specific situation, the following benefits may be taken into account:

  • Increased Principal Payments: You are basically paying an additional year’s payment towards your principal by making 26 installments as opposed to 12. This has the potential to lower the total interest paid on your mortgage drastically. 
  • Faster Mortgage Payoff: The additional principal payments from bi-weekly payments can accelerate your mortgage payoff. This translates to saving money on interest and potentially owning your home sooner.
  • Improved Budgeting: Spreading your mortgage payment across 26 bi-weekly installments can make budgeting easier for some individuals.  Smaller, more frequent payments might feel less overwhelming and help you stay on track financially.
  • Psychological Advantage: Paying off your mortgage faster and with a lesser payment each time might give you a sense of success. This psychological lift may encourage you to stick with your budgetary objectives.

Important Note: It’s critical to find out whether your lender accepts bi-weekly payments and to ask about any connected costs. It’s also crucial to make sure you have enough money to pay the more regular debits.

In conclusion, while the traditional monthly mortgage payment is familiar territory, bi-weekly payments offer a compelling alternative for Canadians seeking to potentially save on interest and accelerate their homeownership journey. 

By increasing payment frequency and effectively making an extra payment annually, bi-weekly plans can significantly reduce your mortgage burden. Remember to discuss this option with your mortgage broker and ensure sufficient funds to cover the more frequent debits. With careful planning, bi-weekly payments can become a powerful tool to achieve your financial goals and reach your dream of homeownership sooner.

Categories: Mortgage


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