What are Accelerated Payments?

Category: Renew Refinance,

An accelerated payment is a mortgage payment that is increased slightly so that you can pay off your mortgage faster. There are two common types of accelerated payments: bi-weekly and weekly. Of the two, bi-weekly is the much more common choice because it matches with pay dates more often.

An accelerated payment works by increasing your weekly or bi-weekly payment by an amount that would have you pay one full month’s payment extra per year.

Accelerated payments are a great way to start paying off your mortgage, but they actually do not have much of an impact on the interest you will pay. Banks and mortgage professionals use this term to make borrowers think they are paying off their mortgage faster, but the amount of interest saved over the course of your term is miniscule.

There’s nothing wrong with accelerated payments, but they are only part of the puzzle. Please give us a call to learn more.

Illustration:
If your payment is $1,000 per month, you pay 12 months per year, which will equal $12,000 of payments that year.

Now, if you pay semi-monthly, or every half month, you pay $500 per payment, for a total of $12,000 per year at 24 payments.

Bi-weekly payments are 26 payments per year with $461.50 per payment.

However, accelerated bi-weekly payments use the semi-monthly payments of $500 26 times. This means that you end up paying $13,000 over the course of the year, or one extra monthly payment.

The Bare Bones

If all you do is an accelerated payment, your mortgage payoff is stunted compared to what is available. In Vancouver, an indeed in all of BC and Canada, due to the fact that mortgage sizes are now very high, paying off a mortgage should be more of a priority.

Continue Reading:

Read Article

All About Pre-Approvals

Category: First Time Buyer,

Are you in the market for a new home? That’s great – but if you’re not already pre-approved from your mortgage broker, be sure to read on. Pre-approvals are very important for two reasons. They give you confidence in knowing that a specific amount of financing is available for you. A pre-approval can put you […]

Read Article

6 Home Purchase Closing Costs

Category: First Time Buyer,

When you purchase your home, there are 6 additional costs to account for.  They include: Home Fire and Flood Insurance Title Insurance Legal Fees Adjustments Land Transfer Tax GST  Here’s an overview of what you can expect. Home and Fire Insurance. Mortgage lenders will require a certificate of fire insurance to be in place by […]