What Frequency of Mortgage Payment Is Best?
posted in Mortgage News
You may not know it, but while you can’t escape the commitment of regular mortgage payments, they don’t have to be monthly. Provided the fine print of your mortgage contract allows for it, you could pay off your mortgage quicker and save money on interest costs.
Talking to a mortgage broker or financial advisor can help you better understand your options, but here is a quick guide to the 6 different types of mortgage payments available to you:
Monthly – this is the most popular payment frequency, and is used by lenders to calculate the amount you would pay on other schedules.
Semi-monthly – with this schedule, monthly payments are split into 2, and on the 1st and 15th of each month, for example, you would pay that divided amount.
Biweekly – choosing biweekly payments means that you’re paying 26 payments yearly, once every 2 weeks. There are typically 3 months of every year, in which you’ll need to make 3 payments in a month.
Biweekly accelerated – 26 payments a year are made, with an additional monthly payment added into the calculation to be spread out over the year's payments. Again, there are typically 3 months of every year, in which you’ll need to make 3 payments in a month.
Weekly – 52 payments are made weekly, for a year.
Weekly accelerated – 52 payments are made over a year, with an additional monthly payment added into the calculation to be spread out over the year's payments.
What does ‘accelerated’ actually mean, and how can it save me money?
With accelerated payments, an extra month is added into your mortgage payment schedule, giving you a slight increase in payments that will help you save money on your interest costs over time.
It’s important to note that your lender may charge a fee for changes to your payment schedule, or permit it under certain conditions, and if you have a restricted mortgage, you may not be able to change your payment options at all.
To help determine whether accelerated payments are feasible or worthwhile for you, talk to a local mortgage broker, who will give you unbiased advice.
Do mortgage brokers recommend accelerated payments?
An experienced mortgage broker will help you evaluate your personal and financial circumstances to determine what kind of payment schedule would work best for you. While finding a little extra in your budget to cover accelerated payments might be a great way to get on a faster path to a shorter mortgage, for others, their budget may be at its limits anyway, and accelerated payments on a regular basis, would be a step too far.
Knowing and understanding your options is the first step towards making a decision about what type of mortgage payment schedule would best suit your circumstances. No two individuals circumstances are the same, and with such an important decision to be made that can affect your entire life, working with a mortgage broker in your locality is strongly recommended, and can help you make the right choice, for the right reasons.