Biweekly vs monthly mortgage payments: the 13th payment most people miss
Short answer: accelerated biweekly means paying half your monthly payment every two weeks. There are 26 two-week periods in a year, so you make 13 monthly payments instead of 12. On a $450,000 mortgage at 4.5 percent over 25 years, that one quiet extra payment clears the mortgage about 3.3 years early and saves roughly $45,000 of interest. Plain biweekly, the option many banks default you to, saves almost nothing. Here is the difference, the calculator, and what a $250 a month prepayment does instead.
Run your own numbers
Monthly vs biweekly vs accelerated biweekly vs +$250
| Option | Each payment | Paid off in | Total interest | Saved |
|---|
Assumes the rate stays the same for the whole amortization, which it will not; the ranking between options holds at any rate. Canadian semi-annual compounding. Estimates, not advice.
Why 26 half-payments beat 12 full ones
A monthly payment of $2,491 is $29,892 a year. Half of it, $1,245, paid every two weeks, is 26 payments: $32,381 a year. The extra $2,491 is one full monthly payment, and because it lands early and often, it all goes to principal. Less principal next period means less interest next period, and the effect compounds for two decades. Most people never feel it because the payment matches a biweekly paycheque, and the two "extra" payments fall in the two months a year that have three paydays.
| Balance at 4.5%, 25 years | Monthly payment | Accelerated biweekly | Years saved | Interest saved |
|---|---|---|---|---|
| $300,000 | $1,660 | $830 every 2 weeks | 3.3 | $30,000 |
| $450,000 | $2,491 | $1,245 every 2 weeks | 3.3 | $45,000 |
| $600,000 | $3,321 | $1,661 every 2 weeks | 3.3 | $60,000 |
| $800,000 | $4,428 | $2,214 every 2 weeks | 3.3 | $80,000 |
The plain-biweekly trap
Lenders offer two things that both say "biweekly". Plain biweekly takes your monthly payment, multiplies by 12, divides by 26, and charges that every two weeks: $1,150 on our example. You pay exactly the same amount per year as monthly. Amortization moves from 25 years to 24.96. Interest saving: about $1,400 over the whole mortgage. It is a frequency change dressed up as a strategy. Accelerated biweekly is monthly divided by two: $1,245. The $95 difference per payment is the entire $45,000.
When you switch, the word to use is accelerated. If the confirmation shows a payment that equals your monthly payment times 12 divided by 26, you got the plain one.
What $250 a month does instead
If your lender makes biweekly awkward, the same effect is available as a fixed prepayment. On the $450,000 example, adding $250 to the monthly payment clears the mortgage in about 21.2 years and saves about $51,000, slightly more than accelerated biweekly because $250 a month is a little more than the $208 a month that accelerated biweekly adds on average. Adding $100 a month saves about $23,000. Every Canadian mortgage contract has a prepayment privilege, commonly 10 to 20 percent of the original principal per year plus a payment-increase option; both of these sit well inside it, so there is no penalty.
The honest comparison is not biweekly versus $250. It is either of them versus doing nothing. Doing nothing on $450,000 costs $297,000 of interest over 25 years.
How to switch, in one call
- Log in to online banking or call your lender and ask to change the payment frequency to accelerated biweekly.
- Confirm the new payment is your monthly payment divided by two, not times 12 divided by 26.
- Line the payment date up with payday. Most lenders let you pick the weekday.
- Check your prepayment privilege on the renewal statement; a payment-increase option of 10 to 20 percent covers this comfortably.
- If your budget is tight, do it at renewal, when the payment changes anyway. See the 120-day renewal plan.
Questions people ask
Biweekly or semi-monthly?
Semi-monthly is 24 payments, same total as monthly. Only accelerated biweekly or accelerated weekly adds the extra payment.
Does it work on a variable mortgage?
Yes. The extra principal reduces the balance regardless of how the rate moves.
Is it better to invest the $250 instead?
That depends on your rate, your tax situation and your tolerance for risk, and it is a question for a licensed advisor. Paying down a 4.5 percent mortgage is a guaranteed, tax-free 4.5 percent. Looni does not recommend investments.
Can I do accelerated weekly?
Yes, a quarter of the monthly payment every week, 52 times. The saving is almost identical to accelerated biweekly.
The dashboard reads your payment line, tells you whether you are on plain or accelerated biweekly, and shows the years and dollars the switch would save, before your renewal clock runs out.
Sources
Financial Consumer Agency of Canada, Paying off your mortgage faster and Choosing a mortgage (payment frequency, prepayment privileges). FCAC Mortgage Calculator. Interest math uses Canadian semi-annual compounding for fixed-rate mortgages.