What are Accelerated Payments?
Accelerated payments are mortgage payments that are increased slightly to help you pay off your mortgage faster. There are two types of common accelerated payments: biweekly and weekly. Bi-weekly is the more common choice, as it matches with pay dates more often than weekly.
How it works
An accelerated payment works by increasing your weekly or biweekly payments by a specific amount that would have you pay one full month’s payment extra per year.
This is a great way to start paying off your mortgage, but when it comes to the interest on your mortgage these payments have little effect on it. However, with accelerated payments they do help you pay off your mortgage a little faster over the period of your mortgage. There is nothing wrong with accelerated payments.
Let's say that your monthly mortgage payment is $1,000 a month, which means you are paying $12,000 per year towards paying off your mortgage. Now if you have semi monthly payments set up, you will be paying $500 per payment for a total of $12,000 per year at 24 payments. Biweekly payments would end up being 26 payments of $461.50 per year.
However, with accelerated bi weekly payments use the same semi-monthly payments of $500 with 26 payments made per year. With this you end up paying $13,000 over the course of the year, which ends up with you making an extra monthly payment each year until your mortgage is paid off.
Across Canada mortgage sizes are becoming very high and paying off a mortgage nowadays should be a top priority. If you do have any questions or concerns or would like to learn more contact us and we will be happy to help