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When paying my mortgage.

making more frequent payments will lower the amount of interest you pay over the life of the loan. unless they don't apply the principle payment when they recieve it or something tricky like that

so make them weekly if you can

why did you say "costs" ? they charge you to pay them? 😕
 
Of course it makes zero difference, except for the interest accumulated on that one week's payment over the period of a week....so nothing. I pay monthly because it's convenient. People who thin kthey're paying it down faster by splitting it in half and paying every two weeks need to take some math lessons and understand that they could mirror the same thing by simply paying about 10% more each payment and paying monthly, because that's really what they're doing anyway when they pay 1/2 month payment every two weeks. It's not like some "super uber trick", though I know some people don't get that. Not saying you're one of them, but some people are.
 
Originally posted by: FortFunFoSho
Will it make that big of a difference between weekly and bi-weekly? It costs the same.
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do you mean monthly and bi-weekly? If so, bi-weekly gets you 1 extra payment per year, so depending on the length of your mortgage, it will shave some time off.
 
Where are you located? In the US, the usual options are monthly or bi-weekly. Monthly being the 1st of each month, and bi-weekly is making half a monthly payment on a set day of the week every 2 weeks. A bi-weekly payment is the same as making one full extra principal payment each year, but is usually inconvenient to those who get paid on a monthly (as opposed to a weekly) basis.
 
Originally posted by: FoBoT
making more frequent payments will lower the amount of interest you pay over the life of the loan.

so make them weekly if you can
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This is the standard "old school" approach to mortgages. Others will argue that you shouldn't be in a hurry to pay down your mortgage except in special circumstances, such as being close to retirement.
 
If you have the money available and can pay bi-monthly and it costs nothing extra but you are essentially paying an extra payment. Why wouldn't you?
 
Sigh. The biggest problem I have with explaining bi-weekly is that people don't get how it works. Bi-weekly does cost extra. Instead of making 1 full payment each month, you make half a payment every 2 weeks. Note that it is not twice a month, but every 2 weeks. There are 12 months in a year, but 52 weeks. Half of 52 is 26, while 2 *12 is 24. So with a bi-weekly payment plan, there will be 2 months every year where you will have to make 1.5 payments. Make sense?

Definitions:
bi-weekly = once every 2 weeks
semi-monthly = twice a month
bi-monthly = once every 2 months
 
Originally posted by: FortFunFoSho
If you have the money available and can pay bi-monthly and it costs nothing extra but you are essentially paying an extra payment. Why wouldn't you?
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Well, as Skoorb alluded to, it's essentially one extra payment per year towards principal. Rather than sending in over twice as many payments, you could divide your payment by 12 (1200/12 = 100 + 1200 = $1300 monthly) and add that amount to your monthly payment..
 
Originally posted by: DBL
Well, as Skoorb alluded to, it's essentially one extra payment per year towards principal. Rather than sending in over twice as many payments, you could divide your payment by 12 (1200/12 = 100 + 1200 = $1300 monthly) and add that amount to your monthly payment..
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Which would be the way to go if you get paid on a monthly basis (i.e. once or twice each month). If you get paid on a weekly basis (i.e. every week or every other week), then you might want to opt for a bi-weekly payment option.

btw, a bi-weekly payment plan typically reduces a 30 year mortgage to 22 years.
 
I understand the basics of a bi-weekly payment plan and the fact that you are essentially paying an extra payment by sheer week breakdown.

What I am asking is that if it is not a money (when you get paid) issue, why would you not do it?
 
Originally posted by: Vic
Sigh. The biggest problem I have with explaining bi-weekly is that people don't get how it works. Bi-weekly does cost extra. Instead of making 1 full payment each month, you make half a payment every 2 weeks. Note that it is not twice a month, but every 2 weeks. There are 12 months in a year, but 52 weeks. Half of 52 is 26, while 2 *12 is 24. So with a bi-weekly payment plan, there will be 2 months every year where you will have to make 1.5 payments. Make sense?

Definitions:
bi-weekly = once every 2 weeks
semi-monthly = twice a month
bi-monthly = once every 2 months
Click to expand...

:thumbsup:

All mortgage question threads should just be forwarded to Vic he has forgotten more about mortgages than most people will ever know.



 
Originally posted by: FortFunFoSho
I understand the basics of a bi-weekly payment plan and the fact that you are essentially paying an extra payment by sheer week breakdown.

What I am asking is that if it is not a money (when you get paid) issue, why would you not do it?
Click to expand...


Not everyone (me for example) likes to have stuff auto-drafted from their bank accounts. Its real easy to get auto-draft turned on, its not always so easy to get it turned off.
 
Originally posted by: Skoorb
Of course it makes zero difference, except for the interest accumulated on that one week's payment over the period of a week....so nothing. I pay monthly because it's convenient. People who thin kthey're paying it down faster by splitting it in half and paying every two weeks need to take some math lessons and understand that they could mirror the same thing by simply paying about 10% more each payment and paying monthly, because that's really what they're doing anyway when they pay 1/2 month payment every two weeks. It's not like some "super uber trick", though I know some people don't get that. Not saying you're one of them, but some people are.
Click to expand...
Actually your statement is incorrect - paying monthly results in 12 payments per year, paying biweekly is 26 payments per year. So if you truly split your monthly payment in half and truly pay 26 payments per year, you've made the equivalent of 13 monthly payments which can make a significant difference over the life of the loan. Here's a simple example of how much can be saved by making 13 payments per year instead of 12. It shows a savings of >$60K on a $161.8K loan (30yr @7.5). Making 26 half-payments save even more than 13 full payments.

I know you were really talking about 24 half-payments versus 12 full-payments (which will also save more than you think), but it does show how much can be saved if you do it right.
 
Originally posted by: FortFunFoSho
I understand the basics of a bi-weekly payment plan and the fact that you are essentially paying an extra payment by sheer week breakdown.

What I am asking is that if it is not a money (when you get paid) issue, why would you not do it?
Click to expand...

See here. Essentially, the argument goes that you can earn more money investing than you would pay in interest by keeping to the minimum payment schedule for your mortgage. Say I have a 6% interest rate on my mortgage. The effective interest rate (see the link above) in my case would be 4%. As long as I can earn more than a 4% return on my investments I should invest the money instead of making an extra mortgage payment.
 
Originally posted by: FortFunFoSho
I understand the basics of a bi-weekly payment plan and the fact that you are essentially paying an extra payment by sheer week breakdown.

What I am asking is that if it is not a money (when you get paid) issue, why would you not do it?
Click to expand...
Because you're taking a shorter term (and thus higher risk to yourself) on the mortgage with no incentive benefit like a lower rate (which is typical for shorter term loans). Thus, you'd be better off managing the extra principal payments voluntarily on your own than having your lender force you into doing it.

I think the best way to explain this to say that you wouldn't refinance a 30 year mortgage to a 15 or 20 year mortgage without rate savings, would you? I mean, even if there were no refinance costs, it'd still be a bad deal because you'd be better off making the shorter term payments on your own than being forced into doing so. If 30 year and 15 year fixed rate mortgages had the same rate, I would NEVER encourage anyone to take out a 15 year, but instead just to make 15 year payments on a 30 year mortgage (which would add up the same thing).
 
I find it more convenient to pay bi-weekly.

Paid on Fridays and the check is automatically drafted from the account on Monday. It's almost as if I can completely forget that I pay a mortgage, and I can simply consider my paycheck to be that many dollars less.
 
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