What is the difference between weekly and accelerated weekly mortgage payments

With a non-accelerated or regular payment plan, the Lender takes 12 months worth of payments and divides this by either 26 or 52 to come up with the bi-weekly or weekly payment. With this adjusted payment, the Lender still receives a stream of income of 12 monthly payments per year, so there is no additional principal available to accelerate the amortization.

So now you know why choosing accelerated bi-weekly vs. Another option to help shorten your amortization is to increase your payments, meaning more principal paid. However, it also means that you will be making twenty six total annual payments, or half of the fifty two weeks in the year. You are paying off your principal debt slightly faster, because you are putting in more payments numerically.

However, you are paying the same overall amount per year, and therefore, your end of mortgage savings are still very low. Over the years this can really add up. Savings often amount to thousands of dollars, depending on your original terms and conditions.

This is not only because you are making payments faster, but you are making more payments overall; your principal debt is lowering, and therefore, you are paying less interest. Bi-weekly means two mortgage payments per month, whereas accelerated bi-weekly, means a mortgage payment once every two weeks. Both of these options help draw down the principal debt faster than monthly payments. Over the long run, an accelerated bi-weekly mortgage can save you money, in total around ten percent of the original price of your house.

At first glance, making 26 payments per year as opposed to 24 might sound like it would not make much of a difference. Consider the following scenario:. For more details on payment frequency and what your best options are, contact us today. Someone from our office will personally get in touch with you within 1 business day. Weekly Accelerated: With this option, the monthly payment amount is divided by 4, and then paid over 52 payments.

As with the bi-weekly accelerated option, each payment will be a little higher than with the typical weekly option. Lump Sum: While not a form of regular mortgage payment, this option will allow you to pay a chunk toward your mortgage principal, up to a certain percentage each year. To further illustrate how accelerating your payments can reduce your overall mortgage length, let's look at an example using a mortgage calculator :.

Let's also assume the home buyer has qualified for a mortgage rate of 3. The main consideration when choosing your mortgage payment frequency is whether paying more each month can be absorbed by your household budget. Would you still be able to cover other debt obligations, contribute to savings, and have enough disposable income to cover everyday expenses? If you have the financial wiggle room to swing it, the benefits can be well worth it, resulting in thousands more in your pocket, and building equity in your biggest asset — your home — even sooner.

Use this handy calculator to get a sense of the Mortgage amount that could work for you. By Phone Give us a call 24 hours a day, 7 days a week at Subscribe now Get personal finance info with our monthly round-up. Email address. Follow us. Accelerated Mortgage Payments Defined.