Choosing the Optimal Payment Frequency for Your Mortgage

Payment frequency is a powerful and often underused lever for reducing the total cost of your mortgage in Quebec. The difference between standard and accelerated options can represent tens of thousands of dollars over the life of your loan, and the change is generally free. Understanding the nuances between each option is essential for making the most advantageous choice.

The five frequency options explained

• Monthly standard: 12 payments per year. This is the base reference. Your full monthly payment is withdrawn once per month. No acceleration benefit.
• Standard bi-weekly: 24 payments equal to half the monthly, for the same total annual cost as monthly. No real savings, only a different distribution of withdrawals.
• Accelerated bi-weekly: 26 payments equal to half the monthly. The two extra payments compared to standard represent one additional month of repayment per year, applied directly to principal.
• Standard weekly: 52 payments equal to the monthly times 12 divided by 52. Same annual cost as monthly, no real savings.
• Accelerated weekly: 52 payments equal to one quarter of the monthly payment. Like accelerated bi-weekly, this equals 13 months of repayment per year, with the same acceleration effect.

Numerical comparison on a $400,000 loan

On a $400,000 mortgage at 5% over 25-year amortization, here is the impact of each frequency. Monthly standard costs about $298,000 in total interest over 25 years. Standard bi-weekly costs about $295,000 in interest, a minimal saving due to slightly more frequent calculation. Accelerated bi-weekly reduces total interest to about $250,000, a savings of $48,000 and amortization shortened to about 22 years. Accelerated weekly offers a nearly identical result to accelerated bi-weekly, with marginally higher savings due to more frequent interest calculation.

How to switch to accelerated bi-weekly

1. Check your current frequency: Check your mortgage contract or annual statement. The exact frequency is indicated there. If your bi-weekly payment is exactly the monthly times 12 divided by 24, you have the standard version.
2. Contact your lender: Call your lender's mortgage service and request the switch to accelerated bi-weekly. The change is generally free and takes effect within 30 days.
3. Check your budget: Accelerated bi-weekly costs about $100 more per month than monthly for a $400,000 loan. Make sure your budget can absorb this increase, which represents an investment of about two coffees per day.
4. Align with your pay cycle: If you are paid every two weeks, accelerated bi-weekly naturally aligns with your pay cycle, making budget management easier.

Ask your lender to switch to accelerated bi-weekly now. It is one of the simplest and most profitable strategies for reducing the total cost of your mortgage. If you want to evaluate the exact impact on your loan, an AMF-certified broker can run the simulation for free with your actual data.