Payment frequency & accelerated payments

Your lender lets you pay on different schedules. Monthly is twelve payments a year. Semi-monthly splits that into two payments a month, so twenty-four a year: same annual total, just smaller and more frequent. Bi-weekly means every two weeks, which works out to twenty-six payments a year because the calendar has fifty-two weeks. Here's the catch most people miss: plain (non-accelerated) bi-weekly takes your annual total and divides it into twenty-six chunks, so you still pay the same amount over a year. It does almost nothing to your amortization, the total number of years until the mortgage is paid off.

Accelerated is the version that actually matters. An accelerated bi-weekly payment is simply your monthly payment cut in half, then charged every two weeks. Because there are twenty-six two-week periods but only twelve months, twenty-six half-payments equals thirteen monthly payments, not twelve. You make one full extra monthly payment every year without it ever feeling like a lump sum. That whole extra payment goes straight against your principal, the amount you actually borrowed, so the balance drops faster and less interest accrues.

The effect compounds over time. On a $500,000 mortgage at 5% over a 25-year amortization, monthly payments run about $2,908. Accelerated bi-weekly is $1,454 every two weeks: roughly $2,908 more paid per year, and it clears the mortgage in about 22 years instead of 25 (a little over three years sooner). Accelerated semi-monthly works the same way, splitting the accelerated amount across the two payments a month. Your rate never changes; you're just feeding the loan a little more, a little sooner. (Note that all Canadian fixed-rate mortgages compound interest semi-annually by law, which is why the exact numbers differ slightly from a simple monthly calculation.)

Worth being clear-eyed about: "accelerated" isn't a discount your lender is handing you. It's your own money paid faster, and it only helps if the higher yearly outflow fits your budget. If cash flow is tight, plain bi-weekly aligned to your paycheque, or ordinary monthly, is perfectly fine, and you can usually get the same result with a normal schedule plus an annual prepayment. The reason accelerated options exist and get promoted is that lenders can market "pay off years early" without changing your interest rate; the years come entirely from the extra payment you're making, not from any generosity on their part.