Can splitting mortgage payment help you shave 10 years from 30 year loan?

[Alex_angel]

I read in some magazine that if you send in 1/2 of your monthly mortgage payment mid month, then the other 1/2 end of month that somehow you save enough from the potential compound interest that you can shave off 10 years from a 30 year fixed loan.

I just don’t get how this would work. Can anyone give some insight on this?

The only thing I can think of is that maybe they meant to send in 1/2 month payment every 2 weeks which means that in a full year you would have made 1 extra months payment. They didn’t spell this out correctly.

[NotCranky]

“The only thing I can think of is that maybe they meant to send in 1/2 month payment every 2 weeks which means that in a full year you would have made 1 extra months payment. They didn’t spell this out correctly.”

I believe one extra payment will take 5 years off, not 10.The advantage to the bank of having 1/2 the money earlier in the month would have to compensate for the rest. Over the years I have seen a few programs like this but am not sure they were designed to shave years off the mortgage. I think they came with a better rate so the benefit was shared with between the borrower and the leder.

HLS could speak to this very well I am sure.

[NotCranky]

“The only thing I can think of is that maybe they meant to send in 1/2 month payment every 2 weeks which means that in a full year you would have made 1 extra months payment. They didn’t spell this out correctly.”

I believe one extra payment will take 5 years off, not 10.The advantage to the bank of having 1/2 the money earlier in the month would have to compensate for the rest. Over the years I have seen a few programs like this but am not sure they were designed to shave years off the mortgage. I think they came with a better rate so the benefit was shared with between the borrower and the leder.

HLS could speak to this very well I am sure.

[NotCranky]

“The only thing I can think of is that maybe they meant to send in 1/2 month payment every 2 weeks which means that in a full year you would have made 1 extra months payment. They didn’t spell this out correctly.”

I believe one extra payment will take 5 years off, not 10.The advantage to the bank of having 1/2 the money earlier in the month would have to compensate for the rest. Over the years I have seen a few programs like this but am not sure they were designed to shave years off the mortgage. I think they came with a better rate so the benefit was shared with between the borrower and the leder.

HLS could speak to this very well I am sure.

[NotCranky]

“The only thing I can think of is that maybe they meant to send in 1/2 month payment every 2 weeks which means that in a full year you would have made 1 extra months payment. They didn’t spell this out correctly.”

I believe one extra payment will take 5 years off, not 10.The advantage to the bank of having 1/2 the money earlier in the month would have to compensate for the rest. Over the years I have seen a few programs like this but am not sure they were designed to shave years off the mortgage. I think they came with a better rate so the benefit was shared with between the borrower and the leder.

HLS could speak to this very well I am sure.

[patientlywaiting]

In theory, yes.

But if you send the bank 1/2 of your payment they will apply it ALL to interest so you’re not reducing principal thus making no difference.

Interest is calculated on a full month basis. As soon as the bank applies a payment, they will send you another statement for the next month. You can make your mortgage payments early but you will not reduce principal by making more frequent or early payments (even if, in January you make 1 year’s worth of mortgage and interest payments in advance of when they are due).

The only way to reduce principal is to make additional principal payments on top of your normal monthly payments (more cash flow out of your pocket).

PS: There are some services that purport to do it for you for a fee. They don’t work and what you pay in fee is more costly.

[patientlywaiting]

In theory, yes.

But if you send the bank 1/2 of your payment they will apply it ALL to interest so you’re not reducing principal thus making no difference.

Interest is calculated on a full month basis. As soon as the bank applies a payment, they will send you another statement for the next month. You can make your mortgage payments early but you will not reduce principal by making more frequent or early payments (even if, in January you make 1 year’s worth of mortgage and interest payments in advance of when they are due).

The only way to reduce principal is to make additional principal payments on top of your normal monthly payments (more cash flow out of your pocket).

PS: There are some services that purport to do it for you for a fee. They don’t work and what you pay in fee is more costly.

[patientlywaiting]

In theory, yes.

But if you send the bank 1/2 of your payment they will apply it ALL to interest so you’re not reducing principal thus making no difference.

Interest is calculated on a full month basis. As soon as the bank applies a payment, they will send you another statement for the next month. You can make your mortgage payments early but you will not reduce principal by making more frequent or early payments (even if, in January you make 1 year’s worth of mortgage and interest payments in advance of when they are due).

The only way to reduce principal is to make additional principal payments on top of your normal monthly payments (more cash flow out of your pocket).

PS: There are some services that purport to do it for you for a fee. They don’t work and what you pay in fee is more costly.

[patientlywaiting]

In theory, yes.

But if you send the bank 1/2 of your payment they will apply it ALL to interest so you’re not reducing principal thus making no difference.

Interest is calculated on a full month basis. As soon as the bank applies a payment, they will send you another statement for the next month. You can make your mortgage payments early but you will not reduce principal by making more frequent or early payments (even if, in January you make 1 year’s worth of mortgage and interest payments in advance of when they are due).

The only way to reduce principal is to make additional principal payments on top of your normal monthly payments (more cash flow out of your pocket).

PS: There are some services that purport to do it for you for a fee. They don’t work and what you pay in fee is more costly.

[golfproz]

I was offered a bi-weekly payment option when I bought my last house. As I recall it knocked off about 6 or 7 years of payments on a 30 year loan. Since I was just scraping by at the time I elected to stay with the monthly payment and when I could I payed extra. A bi-weekly is a good way to go if you plan on staying in the home long term and your finances can handle two large payments per month. I’m a little too scatter brained to make sure I always have that much in my checking account.

[golfproz]

I was offered a bi-weekly payment option when I bought my last house. As I recall it knocked off about 6 or 7 years of payments on a 30 year loan. Since I was just scraping by at the time I elected to stay with the monthly payment and when I could I payed extra. A bi-weekly is a good way to go if you plan on staying in the home long term and your finances can handle two large payments per month. I’m a little too scatter brained to make sure I always have that much in my checking account.

[golfproz]

I was offered a bi-weekly payment option when I bought my last house. As I recall it knocked off about 6 or 7 years of payments on a 30 year loan. Since I was just scraping by at the time I elected to stay with the monthly payment and when I could I payed extra. A bi-weekly is a good way to go if you plan on staying in the home long term and your finances can handle two large payments per month. I’m a little too scatter brained to make sure I always have that much in my checking account.

[golfproz]

I was offered a bi-weekly payment option when I bought my last house. As I recall it knocked off about 6 or 7 years of payments on a 30 year loan. Since I was just scraping by at the time I elected to stay with the monthly payment and when I could I payed extra. A bi-weekly is a good way to go if you plan on staying in the home long term and your finances can handle two large payments per month. I’m a little too scatter brained to make sure I always have that much in my checking account.

[Daniel]

No way, Alex. One’s got to make larger or more frequent payments in order to pay the mortgage early (as you say, bi-weekly, for example). It’s as simple as that. More money needs to come out of one’s pocket and go to the bank, it’s basic math. Every two weeks, every full moon, every time the Padres win, whatever. The thing is, if one makes extra payments, then the mortgage will be paid off early.

And, since we’re on this topic, let me address the miracle software thing discussed on a nearby thread. Ahem… I’ll try to put on a straight face… OK, I give up… Bwahahahahhahaha…

But seriously now: how could anybody fall for that scam is beyond me. Do people really have no math skills whatsoever these days?

[Daniel]

No way, Alex. One’s got to make larger or more frequent payments in order to pay the mortgage early (as you say, bi-weekly, for example). It’s as simple as that. More money needs to come out of one’s pocket and go to the bank, it’s basic math. Every two weeks, every full moon, every time the Padres win, whatever. The thing is, if one makes extra payments, then the mortgage will be paid off early.

And, since we’re on this topic, let me address the miracle software thing discussed on a nearby thread. Ahem… I’ll try to put on a straight face… OK, I give up… Bwahahahahhahaha…

But seriously now: how could anybody fall for that scam is beyond me. Do people really have no math skills whatsoever these days?

[Author]

Posts