The short version
- Accelerated biweekly takes half your monthly payment every two weeks. That is 26 payments, or the equivalent of 13 monthly payments a year, according to nesto.
- Regular biweekly is different: it spreads the same yearly total over 26 smaller payments, so the yearly total is unchanged.
- In the illustration below, one extra monthly payment a year trims about three and a half years from a 25-year schedule. That is arithmetic on assumptions, not a forecast.
- It only works as intended if your contract lets the extra money go to principal. Check your prepayment privileges first.
- If your budget runs on monthly paycheques, an extra payment each year by another route can do the same job.
Biweekly and accelerated biweekly are not the same thing
Lenders in Canada offer several payment calendars. Two of them sound identical and behave differently.
Tangerine describes six payment options offered in Canada, and notes that major banks offer the accelerated versions only on weekly and biweekly schedules, not monthly. nesto explains the two biweekly versions this way: a regular biweekly payment spreads your annual total over 26 smaller payments, so you pay the same each year as you would monthly. An accelerated biweekly payment takes your monthly payment, halves it, and collects that amount every two weeks.
There are 26 two-week periods in a year, so the accelerated version adds up to 13 monthly payments instead of 12. That one extra payment a year goes toward principal, which is what shortens the schedule.
The same mortgage three ways
The following is our own illustration, using Canadian fixed-term compounding (twice a year, not monthly). It assumes a $500,000 mortgage, a 25-year amortization and a 5.00% fixed mortgage held at that price for the whole schedule, which in real life it would not be, because a term ends and the next one is priced then.
- Monthly: about $2,908 a month. The mortgage is repaid in 25 years, with about $372,400 of total interest.
- Regular biweekly: about $1,342 every two weeks, which equals the same yearly total. The schedule ends at almost the same time, with about $1,900 less interest, because payments come slightly earlier on average.
- Accelerated biweekly: about $1,454 every two weeks. The mortgage is repaid in roughly 21.5 years, with about $312,000 of total interest, which is about $60,400 less than the monthly version in this example.
The figures are not a promise of anything. They show the mechanism: one extra monthly payment a year, applied to principal early in the schedule, when it removes the most future interest.
A shorter and more realistic view is the first term. After five years, the monthly version leaves about $442,500 owing in this illustration. The accelerated biweekly version leaves about $425,800. That is a difference of about $16,700 in principal at the first renewal, and a lower balance is what the next term gets priced on.
Where it stops helping, and what to check
Tangerine's guidance on this topic is that it is important to make sure the terms of your mortgage allow you to pay it off more quickly, whether through the ability to pay more up to a certain percentage with each payment or through a lump sum each year. Those limits are set out in the prepayment section of your mortgage agreement. Our article on prepayment privileges walks through what to look for.
- Does your lender offer it? Not every product or lender does. Some low-cost mortgages limit payment options.
- Do the extra amounts go to principal? They should, but ask.
- Does your pay line up? An automatic withdrawal every second Friday is easy to budget when you are paid every second Friday. Paid monthly, it is harder.
- Is prepayment the best use of that money? If you carry higher-cost debt, or have no emergency savings, the extra payment may belong somewhere else first.
What happens at renewal
When a term ends, the next one is priced at whatever the market is then, and your payment calendar usually carries over. If your amortization has shortened, the remaining years go on the new term. That is why the lower balance matters: a smaller amount is being renewed.
It is also a good moment to look again at the payment calendar. Some people accelerate for one term and return to monthly when other costs rise. There is no penalty for changing the calendar in most contracts at renewal. Check yours.
Nearly thirty years in Canadian financial services, based in Waterloo Region and working across Ontario. Most people are handed a product — you deserve a plan.
The payment calendars are described by the Tangerine and nesto pages linked below. The worked example is our own arithmetic using semi-annual compounding for a fixed term and assumes a constant 5.00% for 25 years, which will not occur in practice. Everything here is general information, illustrative, and subject to full qualification, lender approval and final terms.
Sources: Tangerine — Accelerated mortgage payments defined · nesto — Accelerated Biweekly Mortgage Payments (glossary)