Bi-Weekly Mortgage Payments: How They Save You Interest and Shorten Your Term
Hi, WealthTrack founder David Pipe here. When it comes to paying off your mortgage, most Canadians stick with a standard monthly payment schedule. However, switching to bi-weekly payments can offer significant advantages. By making payments every two weeks instead of once a month, you can reduce your total interest costs and pay off your mortgage faster—sometimes by several years.
In this article, we’ll explain how bi-weekly mortgage payments work, show examples of potential savings, compare them to monthly payments, and discuss strategies to maximize the benefits. While calculators can help visualize the savings, understanding the mechanics behind bi-weekly payments is key to making informed financial decisions.
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What Are Bi-Weekly Mortgage Payments?
Bi-weekly payments involve splitting your monthly mortgage payment in half and paying that amount every two weeks. Since there are 52 weeks in a year, this results in 26 half-payments, which is equivalent to 13 full monthly payments per year instead of the usual 12.
This “extra” payment goes directly toward reducing your mortgage principal, which:
Reduces interest charges over time
Accelerates the payoff schedule
Builds equity faster
Even though the difference seems small month-to-month, the cumulative effect over the life of the mortgage can be substantial.
How Bi-Weekly Payments Reduce Interest
Mortgage interest is calculated based on your outstanding principal. By making bi-weekly payments, you reduce the principal slightly more often than with monthly payments. This reduces the amount of interest charged in the subsequent periods.
Here’s an example:
Mortgage amount: $400,000
Interest rate: 5%
Amortization: 25 years
Monthly payment: $2,338
If you pay monthly, your mortgage will take 25 years to repay, and you’ll pay roughly $301,400 in interest.
Switching to bi-weekly payments:
Each payment: $1,169 (half of $2,338) every two weeks
Total payments per year: 26 (equivalent to 13 monthly payments)
New amortization: ~22 years
Interest paid: ~$268,000
Savings: ~$33,400 in interest and 3 years shorter amortization—just by changing the payment schedule.
Bi-Weekly vs. Monthly Payments: Key Differences
FeatureMonthly PaymentsBi-Weekly PaymentsPayment Frequency12 per year26 half-payments (13 full) per yearPrincipal ReductionSlowerFasterInterest PaidHigher over termLower over termMortgage TermStandard amortizationShorter due to extra paymentsCash Flow ImpactLarger monthly outlaySmaller, more frequent payments
As the table shows, the primary advantage of bi-weekly payments is accelerated principal reduction, which saves both time and money.
How Much Can You Save With Bi-Weekly Payments?
Savings vary depending on your mortgage size, interest rate, and amortization period. Here’s another example for a smaller mortgage:
Mortgage amount: $250,000
Interest rate: 4.5%
Amortization: 25 years
Monthly payments: $1,388
Total interest: ~$166,500
Bi-weekly payments: $694 every two weeks
Total interest: ~$147,000
Time saved: ~2.5 years
Even for smaller mortgages, switching to bi-weekly payments can make a noticeable difference in interest paid and term length.
Factors That Influence Bi-Weekly Savings
Interest Rate: Higher interest rates amplify the benefits of bi-weekly payments because the principal is reduced more frequently, lowering interest charges.
Amortization Period: Longer amortization periods benefit more from bi-weekly payments since the extra payment reduces interest accrued over many years.
Payment Flexibility: Some lenders allow accelerated bi-weekly payments, which increase the principal payment further. This can produce even greater savings.
Additional Prepayments: Making extra lump-sum payments on top of bi-weekly payments further accelerates the mortgage payoff and reduces interest.
How to Set Up Bi-Weekly Payments
Most lenders offer bi-weekly payment options. Here’s how to get started:
Contact Your Lender: Ask if they allow bi-weekly payments and whether they offer a standard or accelerated bi-weekly plan.
Set Up Automatic Payments: Many banks allow automatic withdrawal every two weeks.
Confirm Allocation: Ensure the extra payment is applied directly to principal, not just toward future interest.
Track Your Savings: Use a mortgage calculator or amortization schedule to see how much interest and time you’re saving.
Common Misconceptions About Bi-Weekly Payments
It Costs More Each Year:
No, bi-weekly payments don’t increase your annual outlay—they just spread payments more evenly and add one extra payment annually.It Works Only for Large Mortgages:
Any mortgage, big or small, benefits from faster principal reduction and interest savings.You Must Change Lenders:
Most lenders allow bi-weekly payments on existing mortgages. No refinancing is necessary.You Have to Pay Exactly Every Two Weeks:
While consistency is important, occasional adjustments or lump-sum payments can also accelerate your mortgage.
Tips to Maximize Bi-Weekly Payment Benefits
Combine with Lump-Sum Prepayments: Even small lump-sum contributions each year significantly reduce total interest.
Use Accelerated Bi-Weekly Payments: Some lenders offer an accelerated plan, where each bi-weekly payment is slightly higher, further reducing interest.
Monitor Interest Rates: For variable-rate mortgages, track rate changes—extra payments on a high-rate mortgage save more interest.
Stay Consistent: Making every bi-weekly payment on time is crucial for maximizing savings.
Why Bi-Weekly Payments Are Worth Considering
Switching to bi-weekly payments is one of the simplest ways to save money on your mortgage without increasing your annual budget. Benefits include:
Interest Savings: Reduces total interest paid over the life of the mortgage.
Shorter Mortgage Term: Pay off your home faster, sometimes by several years.
Faster Equity Growth: Accelerates ownership and financial flexibility.
Smaller, Manageable Payments: Bi-weekly payments can be easier to budget than a single large monthly payment.
Even if you start with a standard monthly schedule, switching to bi-weekly payments later can still yield meaningful savings.
Conclusion
Bi-weekly mortgage payments are a powerful tool for Canadians looking to save on interest and pay off their mortgage sooner. By making payments every two weeks instead of monthly, you effectively make one extra full payment each year, which reduces principal faster and cuts overall interest costs.
Whether you have a large mortgage or a modest one, the cumulative effect of bi-weekly payments can be substantial. Combined with strategies like lump-sum contributions or accelerated plans, bi-weekly payments help homeowners achieve financial freedom sooner and build equity faster.
Before making the switch, speak with your lender to confirm the payment schedule, ensure the extra payments apply to principal, and consider tracking your progress using an amortization schedule or mortgage calculator. The sooner you start, the more you can save—and the faster your dream of being mortgage-free can become a reality.
