Weekly and Bi-Weekly Mortgages

A Bi-Weekly Mortgage, unlike its name may suggest, is not a regular mortgage with a payment period of two weeks. In most cases, a product offered to you as a Bi-Weekly Mortgage is, in fact, a Bi-Weekly Accelerated Mortgage. Its main advantage is the accelerated repayment mechanism it is based on. It really helps you save on time and, what’s even more remarkable, on your funds. The acceleration appears all by itself as you pay a half of your monthly payment every two weeks instead of actually twice a month. Such scheme creates a sort of a 13th month in a loan year and makes room for one extra monthly payment. Whereas the regular payments pay off both the principal and the interest, the extra payment is basically principal-only, i.e. the whole amount is subtracted from the remaining principal thus improving your overall loan balance.

Question:
Does this mean I actually have to pay more?
Answer:
Yes and No.

Question:
How come?
Answer:
Yes is the short answer. Yes, the total sum of money you have to pay in a year becomes a little bit higher. However, in the long run, it allows you to pay your loan off sooner and saves you all the money you otherwise would have to pay as Interest. That was the long answer, which is No.

Question:
How do I know if it’s worth it?
Answer:
Use the Mortgage Calculator.

The Mortgage Calculator offers you ready-made templates for accelerated Weekly and Bi-Weekly Mortgages (different only in frequency). Use the special tab provided to view the effects of Additional Payments – the time and money saved, the period payment increase; and to compare it with a True [Bi-]Weekly Mortgage, i.e. with a regular two-week payment period mortgage without acceleration.

In addition, you can adjust the Interest Rate using the wizard provided or directly in the table. However, we strongly recommend you to read the article about Extra Payments first to get a clear idea of how acceleration works with Adjustable Rate Mortgages.

By default the calculator adds equal sums from the total amount of the “13th month” extra payment to every of the 26 payments within a year. Yet Additional Payments do not have to be distributed evenly throughout a year. They can be paid, for instance, once a year. Such more complicated Mortgage schemes can be calculated via the Custom Mortgage template. Enter your numbers and select Bi-weekly as the Payment Frequency in the Amortization Properties. This gives you a True Bi-Weekly Mortgage. Acceleration can be simulated with the help of the Extra Payments wizard. All you have to do is accept the default values there, as they are deliberately preset to represent the necessary parameters.