Accelerated payments will be a little higher than the non-accelerated options, which is how they are beneficial. By simply accelerating your payments, you’ll be making the equivalent of roughly one additional monthly payment per year, which is applied 100% towards your principal. This alone will knock a 25-year amortization down to approximately 22 years, 9 months*, which is why accelerated payments are so popular. You’re immediately slashing 2 years 3 months off your mortgage.
Accelerated biweekly payments are calculated simply by dividing your monthly payment in half, which is then paid every two weeks. Both biweekly options have a total of 26 payments each year, however, the accelerated payment will be a little higher.
Instead of dividing your monthly payment in half as you would with accelerated biweekly payments, the accelerated weekly payment is your monthly payment divided by four, which is then made every week. Again, the accelerated payment will be a little higher than the non-accelerated version. Both weekly and accelerated weekly payments will have a total of 52 payments per year.
There is a negligible benefit to accelerated weekly vs. accelerated biweekly. On a $500,000 mortgage at 1.59% amortized over 25 years, you’d save only $22.15 over the FULL 25-year amortization by choosing accelerated weekly over accelerated biweekly payments. Less than $1 per year.
Let’s take a look at how the payments will vary for each payment frequency on a $500,000 mortgage at 1.59% amortized over 25 years:
|FREQUENCY||PAYMENT||# OF PAYMENTS||TOTAL ANNUAL PAYMENTS||EFFECTIVE AMORTIZATION|
|Accelerated Biweekly||$1,009.83||26||$26,255.58||22 years 9 months|
|Accelerated Weekly||$504.81||52||$26,250.12||22 years 9 months|