Do You Know Your Mortgage Payment Options?
Did you know that you have options when it comes to how often you make your mortgage payments? These payments can range from monthly to bi-monthly, bi-weekly, accelerated bi-weekly, or even a weekly payment.
It is important to understand the different mortgage payment frequencies to ensure you are making your payments on a schedule that benefits you the most. For example, if you find making one large payment a challenge, breaking it up into smaller more frequent payments may be easier to manage.
Here is an overview to give you a better understanding of what each of the different payment frequencies mean:
Monthly Payments - A monthly payment is a single, large payment, paid once per month. This is the default that sets your amortization; a 25-year mortgage, paid monthly will take 25 years to pay off. With this payment frequency, you make 12 payments per year.
Bi-Weekly Payment - A bi-weekly mortgage payment is a total of 26 payments per year. It is calculated by multiplying your monthly mortgage payment by 12 months and dividing it by the 26 instalments.
Accelerated Bi-Weekly Payments - An accelerated bi-weekly mortgage payment is also 26 payments per year, but the payment amount is higher than a regular bi-weekly payment frequency. Opting for an accelerated bi-weekly payment will not only pay your mortgage off quicker, but it is guaranteed to save you a significant amount of money interest over the term of your mortgage. This frequency also allows the mortgage payment to be split up into smaller payments vs. a single, larger payment per month.
Weekly Payments - Similar to monthly payments, your weekly mortgage payment frequency is calculated by multiplying your monthly mortgage payment by 12 months and dividing by 52 weeks in a year. In this case, you would make 52 payments a year on your mortgage.
In addition to fine-tuning your payment schedule to best suit you and your financial situation, most mortgage products include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage, minus the interest payments) per calendar year. This can help reduce your amortization period (the length of your mortgage.)
There is plenty to consider when it comes to your mortgage! If you have any questions about your options and are struggling to decide which one is best for you, connect with me today, I’d love to assist!
☕️ Chad Eliason⠀⠀⠀⠀⠀⠀⠀