Houses for Sale in Comox Valley: Are You Saving With a Bi-Weekly Mortgage?

For most Canadians, purchasing houses for sale in Comox Valley typically involves securing a mortgage. Since buying a home is a significant investment, obtaining a mortgage is often the most practical option for achieving the Canadian dream. Considering the substantial amount a mortgage represents, it’s crucial to be aware of all your available options. In this article, we will explore a popular strategy homeowners use to pay off their mortgages: bi-weekly payments. Here, we will break down common myths, explain how bi-weekly mortgage payments work, and give some insight into their value. Read on to find out if bi-weekly mortgage payments can truly save you money.

The Basics of a Bi-Weekly Mortgage Payment Schedule 

Many people often get caught up in deciding what kind of payment frequency to choose for their mortgage. Lenders typically offer six different options that range from monthly, to bi-weekly. These options can be confusing as many of them sound the same. To help you better understand what each of these means we will use the following as a case study:

Case: Hayley has a $1000 mortgage payment and wants to know what option is best for her. Let’s take a look at some of her choices.

Semi-monthly mortgage payments are when you make two payments per month on specific dates, like the 1st and the 15th. This results in 24 payments per year. In Hayley’s case, this would mean $500 paid twice per month.

On the other hand, bi-weekly payments are when you make one payment every 14 days (e.g. your monthly payment multiplied by 12 and divided by 26). Consequently, this results in 26 payments per year. If Hayley chose a bi-weekly payment schedule, she would be paying $461.54 every second week.

Another similar option is the accelerated bi-weekly payment schedule where you make one payment every 14 days in the amount of your monthly payment divided by two. This results in you paying one extra monthly payment per year. For Hayley, this would equate to $500 paid every second week. 

If Hayley wants to pay down her mortgage faster and accrue less interest, the accelerated bi-weekly option is likely going to be the best choice. However, it’s important to consider other factors like lender fees to enroll in an accelerated mortgage program, financial capability, and other potential risks. Talking with a trusted broker/lender is always a good choice before you make any changes to your payment plan. 

What to Know about Bi-Weekly Mortgage Payments for Houses for Sale in Comox Valley

People who choose to enroll in a bi-weekly mortgage plan, generally do so to help minimize the amount of interest they will pay on their loan. However, it is important to note that the amount of interest saved when choosing bi-weekly payments is often inconsequential. Depending on the value of your home, bi-weekly payments may only save you a few grand. And, your mortgage will generally still take the same amount of time to be paid off as in the case where you choose monthly payments. Thus, monthly and bi-weekly payments are, overall, nearly the same. 

What’s more, is that unlike semi-monthly mortgage payments, bi-weekly payments often don’t coincide with paydays. Since you are paying every 14 days, there is no set date for when you make a payment. Instead, it is usually based on a specific day of the week, for example, Friday.  This means that some months you will make only two payments and others you could make three. 

If paying down your mortgage fast is what truly matters to you, then an accelerated bi-weekly payment is where you want to look. Accelerated bi-weekly payments result in you paying an additional monthly payment per year for a total of 13 instead of 12. This can substantially reduce your amortization period and reduce the amount of interest you will have to pay over time. In a case study where a home buyer has a $500,000 mortgage with an interest rate of 5% for 25 years, the mortgage could be paid off in as soon as 21.5 years with accelerated bi-weekly payments. Thus, paying off your mortgage 14% faster than monthly or regular bi-weekly payments. 

Contact us About Houses for Sale in Comox Valley!

Now is the time to get a move on your 2024 goals in real estate! If you are curious about buying or selling real estate for sale in Comox Valley, we encourage you to contact us today! Moreover, if you have any questions about mortgages, be sure to reach out to us! We are excited to get your homebuying dreams on track. A home in the Comox Valley is a great lifetime investment. Be sure to check out our social media here, and return next month for more real estate-related content!