Understanding Biweekly Payments and Payment Frequencies

The term bi-weekly often causes confusion when it comes to mortgage or loan payments.

However, it’s quite simple. 

If you pay bi-weekly payments, you make one payment every two weeks.

That’s 26 payments annually.

Understanding Mortgage or Loan Payment Frequencies

Payment frequency can influence how much interest you pay when you borrow which directly influences your overall cost.

How often you make payments can also affect how quickly you pay off your debt.

However, lenders may not make it easy for you to decipher your options.

They’re focused on the business of lending, not what’s best for you, your lifestyle, and your goals.

Luckily, this article will help you make an informed decision as we explore the pros and cons of the most common payment frequencies offered by Canadian lenders.

1. Weekly Payments

Pros

Making a smaller payment every week can be convenient if you’re paid weekly.

You can divide your mortgage or loan payment between four periods over the course of a month, which improves cash flow.

Weekly payments will also save you a tiny amount of interest since you’re reducing your principal outstanding quicker.

Cons

Very few people receive a paycheque every week, making this method inconvenient.

The risk of bouncing a payment increases quite a bit, which is something you never want to happen.

2. Biweekly Payments

Pros

This can be a convenient option if you receive a paycheque every two weeks.

It’s easy to pay a portion from each cheque, which improves cash flow.

However, the greatest benefits of a bi-weekly payment plan is that you pay off your mortgage or loan quicker and save on interest, since you’re paying 26 payments annually (52 weeks/2). 

With only 12 months in each year, you’re paying an extra month of payments on your mortgage annually. 

Cons

Paying an extra month on your mortgage may not be an expense you can afford.

You may also have better uses for that money.

Calendar with stickies

3. Semimonthly Payments

Pros

You pay semi-monthly payments twice a month, usually half on the 1st and the other half on the 15th.

This can be convenient when this payment scheme aligns with your pay periods.

Cons

Interest still accumulates on the balance you haven’t paid.

As a result, this payment frequency offers little or no overall savings.

4. Monthly Payments

Pros

This is the most popular way to repay a mortgage or loan.

Payments often fall on the 1st of every month, making it easy to remember.

Your lender may allow you to switch this date for convenience too.

Cons

Since you’re only paying once a month, more interest accrues between payments.

You also pay more interest over the life of your mortgage or loan.

Examples of Different Payment Frequencies

All this is well and good, but it doesn’t give you a realistic overview of the impact of payment frequency on your mortgage.

Whether one method leads to less interest or shortens your mortgage, it doesn’t tell you by how much.

For demonstration purposes, we’ve calculated the impact on a $500,000 mortgage over a five year term.

The interest rate is 2.5% with a 25-year amortization.

Frequency Start Balance Payment Amount # of Payments Per Year End Balance
Weekly $500,000 $516.59 52 $423,206.74
Bi-Weekly $500,000 $1,033.35 26 $423,201.62
Semi-Monthly $500,000 $1,119.50 24 $423,200.77
Monthly $500,000 $2,239.83 12 $423,189.67

As you can see, making payments more frequently doesn’t make much difference even over a five year term.

They only make an impact over the course of the long amortization period. 

Plus, pouring your money into your mortgage may not be your best financial option.

You may want to invest this money, pay off debts with high interest rates, or use it to tap into new opportunities.

Biweekly vs Accelerated Biweekly Payments

Lenders calculate bi-weekly payments by multiplying your monthly payment by 12 months and then dividing the result by 26.

For instance, if your monthly mortgage payment is $1,400 your bi-weekly payment would be $646.15 ($1,400 x 12/26).

For accelerated bi-weekly mortgage payments, lenders divide your monthly payment in two and withdraw one portion every two weeks.

That’s 26 payments annually.

For instance, if your monthly mortgage payment is $1,400 your accelerated bi-weekly payment would be $700.00.

You’re paying a slightly higher amount each payment when compared to bi-weekly payments.

This reduces your principal and shortens the amortization period.

Biweekly vs Semimonthly Payments

You pay your bi-weekly mortgage or loan payment every two weeks.

That’s 26 payments annually.

You pay your semi-monthly mortgage or loan payment on two specific days of the month.

Typically, these are the 1st and 15th of the month.

That’s 24 payments annually.

Did You Know?

Your lender may allow a yearly, penalty-free lump-sum payment, most (if not all) of which will be applied to the mortgage principal amount.

Frequently Asked Questions

  • What is the best payment frequency for a mortgage?
  • Do biweekly payments shorten mortgage length?

Charlene Royston has written extensively for the private, public, and non-profit sectors for over ten years. Her experience working with a trust company led to a special interest in personal finance, including mortgages, investments, and retirement options. By simplifying the complex, she hopes to empower others to make more informed decisions.