When it comes to managing your paycheck for your mortgage payment for our house, it becomes very tedious at times to keep track.
There must be a way to structure it! To understand and manage your money, you must set a period in which you can break your payment.
Fortunately, there are two ways to break your payment, i.e. bi-weekly and Accelerated bi-weekly.
- Bi-weekly mortgage payments are made every two weeks, while accelerated bi-weekly payments are calculated as half of the monthly payments made every two weeks.
- Accelerated bi-weekly payments result in faster mortgage repayment and interest savings than standard bi-weekly payments.
- Both bi-weekly and accelerated bi-weekly payment options can lead to more manageable and budget-friendly mortgage repayment schedules.
Bi-Weekly vs Accelerated Bi-Weekly
The difference between Bi-weekly and Accelerated Bi-Weekly is that in a bi-weekly payment,, you must pay twice a month, whereas Accelerated Bi-weekly requires you to pay every once every two weeks. If you follow a Bi-weekly payment method,, then by simple calculation, you need to pay 26 times, and if it is Accelerated Bi-weekly, then it comes down to 26 payments in a year, but the payment is equivalent to an amount of 13 months.
A bi-weekly mortgage payment is one of the different frequencies for price. Bi-weekly payments allow us an amount of mortgage every twice a month, which gives a total of 26 charges in a year.
Here the number of payments is 26 because the lender divides the total amount by 26. In effect, biweekly payment is the payment you would make for 12 months.
Accelerated Biweekly payments are intended to make the mortgage payment a bit easier,, but the amount paid is a bit more than bi-weekly.
The frequency of payment is decided by dividing the number of weeks in a year by two, which results in no of payments to 26 as bi-weekly. The amount paid, however is equivalent to the amount paid for 13 months.
|Parameters of Comparison||Accelerated Bi-weekly||If you choose this payment option, then you pay a bit more.|
|Amount||In bi-weekly payments, you need to pay less.||When the payable amount is multiplied by 12 and divided by 26 it gives the no of payments.|
|Calculation of no of payment||Divide the monthly amount by two, and you will get the amount payable.||Divide the monthly amount by two and you will get the amount payable.|
|Payment equivalent||It is equivalent to 12 months of payment.||It is equivalent to 13 months of payment.|
|Fastness||It is a slower mode of payment.||It is a faster mode of payment.|
|Interest saving||This method will lead to higher interest payments.||This method helps you reduce interest payments.|
What is Bi-Weekly?
The bi-weekly payment method is a mortgage payment method that is less costly regarding the amount paid per period. The number of payments is estimated by taking the total cost for 12 months and dividing it by 26.
In total, the number of payments made per year is 26. The mode of payment is a bit slower when compared, and costs more than the accelerated mode of payment.
Bi-weekly payments are made to make it easier, and when compared to the monthly payment method, it is a bit faster.
The payment method, in effect helps you lower your principal amount when compared to monthly payments faster, but it is lesser when compared to the accelerated version of Bi-weekly.
Bi-weekly payment is a slightly slower mode of payment than the weekly payment method you need to pay every week.
This mode of payment is generally offered by third-party lenders. This mode of income reduces the loan term, but the extra fee paid to the lender burns a hole in the pocket.
This method’s payment is extra, which could be compensated in monthly payments by just paying one additional mortgage. The involvement of the third party is because the moneylender does not prefer to take half payments.
What is Accelerated Bi-Weekly?
Accelerated Bi-weekly payments are a faster way to complete your mortgage payment. The mortgage payment method allows you to cool down the loan period but is slightly heavier on your pocket.
You end up paying one extra payment in a year which helps you lower the principal amount much faster when compared to normal bi-weekly. Accelerated bi-weekly payment is arrived at by multiplying the amount payable by two and dividing it by 26.
The amount deducted from your bank follows two weeks. The payment method is intended to accelerate the payment method,, hence the name accelerated bi-weekly.
The number of payments is still 26 as that of bi-weekly, but the amount payable is a bit higher.
Depending on the terms and conditions of your loan, the saving amount is higher as it helps you repay the loan faster, which in turn enables you to deplete your principal amount more quickly.
The interest payable reduces by a greater margin due to the fast depreciation of the principal amount,. The no of payments made per year is one more than regular payments.
You end up making thirteen payments in a year, one higher than the monthly payments. The payment method can become a load or a boon depending on the third party that helps you convert your amount into accelerated bi-weekly.
Main Differences Between Bi-Weekly and Accelerated Bi-Weekly
- Bi-weekly and Accelerated Bi-weekly payment methods differ in the amount to be paid every period. In Bi-weekly payments, the amount is lesser.
- Accelerated bi-weekly allows you to burn up the principal amount faster when compared to Bi-weekly.
- Bi-weekly payments are not very helpful in savings when compared to accelerated bi-weekly payments.
- To calculate the amount is bi-weekly payment take the amount payable for 12 months and divide it by 26 whereas in accelerated bi-weekly the monthly payment is divided by 2.
- Accelerated bi-weekly helps reduce interest payable faster whereas bi-weekly is slower, and interest payable every period is higher.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.