Regular vs. Accelerated Mortgage Payments – What’s the Difference?

One of the first choices you’ll make with your mortgage is how often you want to make payments. Most people go with the standard monthly option, but there are some “accelerated” choices that can make a big difference over time.

Regular Payments
With regular payments (monthly, semi-monthly, bi-weekly, or weekly), your lender simply takes your yearly mortgage amount and splits it up. So whether you’re paying once a month, every two weeks, or every week, the total you pay in a year is the same. It’s just broken into smaller pieces. To calculate your payments you would take the monthly payment and multiply it by the 12 months in a year and then calcuate the mortgage payment by dividing that number by 24 for semi-monthly payments, 26 for bi-weekly, or by 52 for weekly payments.

Accelerated Payments
Accelerated payments are where you can sneak in some big savings. With accelerated bi-weekly or accelerated weekly, you end up making the equivalent of one extra monthly payment each year. Basically you take the monthly payment and multiply it by 13 and then divide that number by your payment frequency (i.e., 26 or 52). That extra bit that was added to those payments goes straight to your mortgage principal, which helps you pay things down faster and cuts down on the interest you’ll pay in the long run.

Why It Matters

• Accelerated = faster mortgage payoff.
• You’ll save money on interest.
• You’ll build equity quickly.

Think of it this way: regular payments keep you on schedule, accelerated payments move you ahead of schedule. If your budget allows, it’s one of the simplest tricks to become mortgage-free sooner.