Mortgage Payment Frequencies

Mortgage Payment Frequency

There are many options when choosing a mortgage payment. The best payment choice depends on an individual’s preference and financial goals. Payment frequency and payment acceleration are the two main factors you need to consider. Here’s some information to help determine the best mortgage payment type for you.

Is a weekly, bi-weekly or monthly payment the best fit for you?

Your work’s pay schedule should be taken into consideration when choosing a mortgage payment frequency. This will ensure that your bank account will always have money available when the mortgage payment comes out. 

Weekly Payments are determined by taking twelve months of mortgage payments and dividing them by fifty-two weeks in a year. Most lenders will withdraw the payment each Friday.

Bi-weekly Payments are determined by taking twelve months of mortgage payments and dividing them by twenty-six. Most lenders will withdrawal the payment every second Friday.

Semi-monthly Payments are determined by taking twelve months of mortgage payments and dividing them by twenty-four. Most lenders will withdrawal the payment on the first and fifteenth of each month. If the first or fifteenth fall on a weekend, the payment will come out on the Friday prior.

Monthly Payments are determined by taking twelve months of mortgage payments and dividing them by twelve months a year. Most lenders will withdrawal the payment on the first of each month. If the first of the month falls on a weekend, the payment will come out on the Friday prior.

Payment frequency isn’t the key factor when reducing the amortization period of your mortgage. Paying down the mortgage principal is. All the talk of bi-weekly payments reducing your amortization period by five years is incorrect. Although you will save some interest in making your payments more frequently, ultimately increasing your payments is what results in a significant amortization reduction.

Accelerated payments are how you reduce your mortgage amortization. Instead of taking twelve months of payments and dividing them by the payment frequency, the bank takes thirteen months of mortgage payments and divides them by the payment frequency. This will increase the payment slightly. The extra money goes directly towards paying down the mortgage principal. This will reduce the amortization on a mortgage by approximately three to five years.

Choosing the right mortgage payment is an important step to achieving your financial goals. This will ensure your payments are made on time and your mortgage goals are achieved.

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