Definition
Accelerated amortization refers to any tactic allowing a mortgage to be repaid in less time than the original amortization period.
**Common methods**: 1. **Accelerated payments**: switching from monthly to accelerated bi-weekly or accelerated weekly (payments equivalent to 13 monthly payments per year instead of 12) 2. **Annual prepayments**: using the prepayment privilege without penalty (typically 10-20% of original principal per year) 3. **Increasing payments**: raising the monthly payment within permitted limits (10-20% per contract) 4. **Lump sum payment**: lump sum at the mortgage anniversary date
**Example — accelerated bi-weekly**: Mortgage $400,000, rate 5.5%, 25 years. - Monthly: $2,449/month → 25 years amortization - Accelerated bi-weekly: $1,224.50 / 2 weeks → amortization shortened to ~22.5 years → ~$30,000 interest savings
**Considerations**: - Check prepayment limits in the contract (penalties if exceeded) - In a high-rate environment, acceleration is more advantageous (principal is repaid when the cost of money is high)