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Difference Between Bi-Weekly and Accelerated Bi-Weekly

business and financeBi-Weekly vs Accelerated Bi-Weekly

Once you have bought a house, the next step is not to move in, but to figure out what you are going to do with your mortgage payments. Since a house is such a big purchase, chances are that you will be taking out a mortgage, that will cover a twenty five to thirty year period. Over that time frame you will be paying both the principal, the actual cost of the house, as well the interest, the cost of borrowing money from the bank. There are many different ways to cut down on your interest payments. For example, some people opt for variable interest rates. However, if you are looking for a surefire way, to not only save money on your interest rates, but also pay off your mortgage years ahead of schedule, you should learn the difference between bi-weekly and accelerated bi-weekly mortgage payments.

The Calendar Difference between Bi-Weekly and Accelerated Bi-Weekly

· Bi-weekly ‘“ payments are made twice a month. They are also known as semi-monthly payments. Generally, these payments are made on the first and fifteenth of every month. This brings your totally number of yearly bank payments to twenty four times a year.

· Accelerated bi-weekly ‘“ payments are made once every two weeks. This means that the payment dates will always fall on a different calendar date. However, it also means that you will be making twenty six total annual payments, or half of the fifty two weeks in the year.

The Savings Difference between Bi-Weekly and Accelerated Bi-Weekly

· Bi-weekly ‘“ saves you a little money over monthly payments. You are paying off your principal debt slightly faster, because you are putting in more payments numerically. However, you are paying the same overall amount per year, and therefore, your end of mortgage savings are still very low.

· Accelerated bi-weekly ‘“ is like making thirteen monthly payments per year. Over the years this can really add up. Savings often amount to thousands of dollars, depending on your original terms and conditions. This is not only because you are making payments faster, but you are making more payments overall; your principal debt is lowering, and therefore, you are paying less interest.

The Money Difference between Bi-Weekly and Accelerated Bi-Weekly

· Bi-weekly ‘“ according to one mortgage company, if you have a twenty five year mortgage for $100,000 with a five percent interest rate, your overall savings will be less than $200 over the course of your mortgage.

· Accelerated bi-weekly ‘“ according to the same mortgage company, your savings on the same mortgage will be over $12,000.

Summary:

1. Bi-weekly means two mortgage payments per month, whereas accelerated bi-weekly, means a mortgage payment once every two weeks.

2. Both of these options help draw down the principal debt faster than monthly payments.

3. Over the long run, an accelerated bi-weekly mortgage can save you money, in total around ten percent of the original price of your house.

4. If you want to save money on your mortgage payments, consider an accelerated bi-weekly payment plan, over a bi-weekly payment plan.

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1 Comment

  1. Hi,

    This information is completely inaccurate. Bi-weekly payments ARE NOT made twice a month. Semi-monthly payments are made twice a month. Bi-weekly payments are made every two weeks, the periodization is based on the week not the month. For example it is semi-monthly payments that are made twice a month, say on the 1st and 15th. Bi-weekly payments would be made on the same day of the week every other week, such as every other Friday, on a 14 week cycle.

    There are 24 semi-monthly payments in a year, and 26 bi-weekly payments in a year.

    The DIFFERENCE between bi-weekly and accelerated by weekly is that regular bi-weekly is regular amortization with 26 periods per year. Bi-weekly accelerated is monthly amortization with 12 periods per year, you divided your monthly payment in half to get your accelerated payment, and you make these payments every two weeks, so you make 13 monthly payments per year instead of the required 12, paying down your monthly loan faster.

    Both bi-weekly and bi-weekly accelerated mean 26 payments a month.

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