Mortgage Glossary

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BI-WEEKLY - Accelerated

Payments are exactly half of a monthly payment amount, collected every two weeks. For example if the monthly payment is $1,000 then the bi-weekly payment will be $500. This saves you money because you pay an extra $1,000 over a twelve month period.

How?

Payments are made on the same day every 2nd week. For example in August of 2000, if your payments are Fridays, your payments will fall on August 4th and 18th. The next month they will fall on September 1st, 15th and 29th.
At least twice a year you will have three payments in the month.

Stated another way;

If you pay $1,000 per month X 12 months = $12,000 in payments for the year, but if you pay bi-weekly then it is $500 X 26 = $13,000.
The amount of interest is the same, therefore, the additional payment of $1,000 (or the amount of YOUR monthly mortgage payment) will be deducted from the balance owing on your mortgage.
You will also make an extra small deduction from the mortgage balance because you are making small payments faster than if they were larger, once a month payments.
This is a very easy payment plan to keep up with if you receive a pay cheque every 2 weeks. If you are paid monthly, or semi-monthly (1st & 15th) bi-weekly payments can be very difficult because of the extra payments twice a year - your income won't change, but your mortgage payment will be 1 1/2 times normal (e.g. instead of $1,000 you will have to pay $1,500). See comparison for an example of the savings.

BI-WEEKLY - Not accelerated

The $1,000 a month payment is multiplied by 12, then divided by 26. This equals a bi-weekly payment of $461.54 - at the end of the year you will have paid $12,000 !

A very small amount of savings are gained due to half of your payment being made early each month.
The main reason for choosing this option would be the convenience of matching your payment to your pay days, with lower payments than the accelerated version.

WEEKLY - Accelerated

Same as bi-weekly accelerated, except that payments occur on the same day every week. Your payments will be one quarter of your normal monthly payment.

If you pay $1,000 per month X 12 months = $12,000
Then you will pay $250 per week X 52 weeks = $13,000
You pay an extra $1,000 per year, which will be deducted from your mortgage balance.
Sometimes there are 5 weeks in the month and you will have 5 payments in that month. This will happen at least 4 times a year. See comparison for an example of the savings.

WEEKLY - Not accelerated

The $1,000 a month payment is multiplied by 12, then divided by 52. This equals a weekly payment of $230.77 - at the end of the year you will have paid $12,000 !
A very small amount of savings are gained due to three quarters of your payment being made early each month. The main reason for choosing this option would be the convenience of matching your payment to your pay days, with lower payments than the accelerated version.

COMPARISON

The table below shows a comparison of interest saved and the length of time this takes, assuming: a mortgage of $142,772.35 at 7% for an original amortization of 25 years.

	Monthly	Semi Mthly	Bi - Week	Weekly
Payments	1000.00	500.00	500.00	250.00
Ammortization	25	24.92	20.58	20.50
Interest Paid	157,227.49	156,085.48	124,238.29	123,850.05
Interest	0	1,142.01	32,989.20	33,377.44
* this table only shows the savings for the accelerated versions of weekly & bi-weekly payments. The not-accelerated versions will save approximately the same amount as the semi-monthly payment.

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