- This topic has 157 replies, 19 voices, and was last updated 13 years, 5 months ago by
HLS.
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AuthorPosts
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November 5, 2007 at 7:19 AM #10817
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November 5, 2007 at 7:49 AM #95785
NotCranky
Participant“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.
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November 5, 2007 at 9:20 AM #95845
patientlywaiting
ParticipantIn 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.
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November 5, 2007 at 9:56 AM #95880
golfproz
ParticipantI 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.
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November 5, 2007 at 10:29 AM #95905
patientlywaiting
ParticipantI 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.
If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can't arbitrarily select to do it or not on your own.
If it's some service or software problem then it's bull.
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November 5, 2007 at 10:34 AM #95908
NotCranky
Participant“let me address the miracle software thing discussed on a nearby thread.”
That topic is not being discussed on that thread so much any more. It is more about the, value or lack of, in paying off a house early, by any means.
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November 5, 2007 at 10:41 AM #95913
Daniel
ParticipantRustico,
No offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
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November 5, 2007 at 11:53 AM #95923
NotCranky
ParticipantNo offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
No problem …I just responded to you to see if I could sucker someone into putting their two cents in on the other thread…with attention to the current focus. I just wonder why software like that would cost as much as a loaded auto- cad for instance? If the program did work it isn’t very sophisticated technologically. It should be free.
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November 5, 2007 at 12:01 PM #95928
patientlywaiting
ParticipantAdding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you're looking to pay off early, such a habit is the way to go.
The key here is extra payments (more initial cash outflow for the borrower). Simply making two payments won't cut it. I think that Alex was looking for some "magic."
Incidentally, I hear that some lenders refuse anything less then the full payment amount.
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November 5, 2007 at 12:11 PM #95937
patientlywaiting
ParticipantRustico, I think that most people would benefit from paying down (and eventually off) their mortgages.
1) For peace of mind.
2) So they don’t spend the money on something else.
3) Keeps them on a monthly routine they are used to. There’s a comfort level in regularity.The reason so many people are in trouble today is that they accessed all their equity using the new “innovative” products and spent it all.
Of course, more sophisticated owners/investors who can manage their money well can place their funds in place that return more than the mortgage. Mortgage money is subsidized in many ways so it’s cheap money. You can earn more in other places.
I would not refinance my 5% mortgage unless the interest rates go down. There are cost associated with refinancing. I’d just as well continue to pay it down.
Some business people take risks with their equity money. In a booming economic, the risks are worth taking, but in a recession, even equity millionaires end up on the street. It’s a fact of life.
I’m all for treating the primary residence as a home (consumption) rather than an investment. Any appreciation is gravy when you sell the house.
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November 5, 2007 at 12:42 PM #95949
cr
ParticipantThis is the second thread on essentially pulling a fast on one the bank in the form of “interest management”. I’m no expert but I’d bet my last dollar banks have thought of and insultated themselves from any opportunity of losing interest that can be schemed up.
Save for revoloving half a million dollar debt between first year zero interest rate credit cards for 30 years, I can’t imagine any legal or non-pain-in-the-ass way around it.
Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.
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November 5, 2007 at 12:42 PM #96008
cr
ParticipantThis is the second thread on essentially pulling a fast on one the bank in the form of “interest management”. I’m no expert but I’d bet my last dollar banks have thought of and insultated themselves from any opportunity of losing interest that can be schemed up.
Save for revoloving half a million dollar debt between first year zero interest rate credit cards for 30 years, I can’t imagine any legal or non-pain-in-the-ass way around it.
Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.
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November 5, 2007 at 12:42 PM #96015
cr
ParticipantThis is the second thread on essentially pulling a fast on one the bank in the form of “interest management”. I’m no expert but I’d bet my last dollar banks have thought of and insultated themselves from any opportunity of losing interest that can be schemed up.
Save for revoloving half a million dollar debt between first year zero interest rate credit cards for 30 years, I can’t imagine any legal or non-pain-in-the-ass way around it.
Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.
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November 5, 2007 at 12:42 PM #96024
cr
ParticipantThis is the second thread on essentially pulling a fast on one the bank in the form of “interest management”. I’m no expert but I’d bet my last dollar banks have thought of and insultated themselves from any opportunity of losing interest that can be schemed up.
Save for revoloving half a million dollar debt between first year zero interest rate credit cards for 30 years, I can’t imagine any legal or non-pain-in-the-ass way around it.
Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.
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November 5, 2007 at 12:11 PM #95996
patientlywaiting
ParticipantRustico, I think that most people would benefit from paying down (and eventually off) their mortgages.
1) For peace of mind.
2) So they don’t spend the money on something else.
3) Keeps them on a monthly routine they are used to. There’s a comfort level in regularity.The reason so many people are in trouble today is that they accessed all their equity using the new “innovative” products and spent it all.
Of course, more sophisticated owners/investors who can manage their money well can place their funds in place that return more than the mortgage. Mortgage money is subsidized in many ways so it’s cheap money. You can earn more in other places.
I would not refinance my 5% mortgage unless the interest rates go down. There are cost associated with refinancing. I’d just as well continue to pay it down.
Some business people take risks with their equity money. In a booming economic, the risks are worth taking, but in a recession, even equity millionaires end up on the street. It’s a fact of life.
I’m all for treating the primary residence as a home (consumption) rather than an investment. Any appreciation is gravy when you sell the house.
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November 5, 2007 at 12:11 PM #96002
patientlywaiting
ParticipantRustico, I think that most people would benefit from paying down (and eventually off) their mortgages.
1) For peace of mind.
2) So they don’t spend the money on something else.
3) Keeps them on a monthly routine they are used to. There’s a comfort level in regularity.The reason so many people are in trouble today is that they accessed all their equity using the new “innovative” products and spent it all.
Of course, more sophisticated owners/investors who can manage their money well can place their funds in place that return more than the mortgage. Mortgage money is subsidized in many ways so it’s cheap money. You can earn more in other places.
I would not refinance my 5% mortgage unless the interest rates go down. There are cost associated with refinancing. I’d just as well continue to pay it down.
Some business people take risks with their equity money. In a booming economic, the risks are worth taking, but in a recession, even equity millionaires end up on the street. It’s a fact of life.
I’m all for treating the primary residence as a home (consumption) rather than an investment. Any appreciation is gravy when you sell the house.
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November 5, 2007 at 12:11 PM #96012
patientlywaiting
ParticipantRustico, I think that most people would benefit from paying down (and eventually off) their mortgages.
1) For peace of mind.
2) So they don’t spend the money on something else.
3) Keeps them on a monthly routine they are used to. There’s a comfort level in regularity.The reason so many people are in trouble today is that they accessed all their equity using the new “innovative” products and spent it all.
Of course, more sophisticated owners/investors who can manage their money well can place their funds in place that return more than the mortgage. Mortgage money is subsidized in many ways so it’s cheap money. You can earn more in other places.
I would not refinance my 5% mortgage unless the interest rates go down. There are cost associated with refinancing. I’d just as well continue to pay it down.
Some business people take risks with their equity money. In a booming economic, the risks are worth taking, but in a recession, even equity millionaires end up on the street. It’s a fact of life.
I’m all for treating the primary residence as a home (consumption) rather than an investment. Any appreciation is gravy when you sell the house.
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November 5, 2007 at 12:01 PM #95988
patientlywaiting
ParticipantAdding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you're looking to pay off early, such a habit is the way to go.
The key here is extra payments (more initial cash outflow for the borrower). Simply making two payments won't cut it. I think that Alex was looking for some "magic."
Incidentally, I hear that some lenders refuse anything less then the full payment amount.
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November 5, 2007 at 12:01 PM #95994
patientlywaiting
ParticipantAdding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you're looking to pay off early, such a habit is the way to go.
The key here is extra payments (more initial cash outflow for the borrower). Simply making two payments won't cut it. I think that Alex was looking for some "magic."
Incidentally, I hear that some lenders refuse anything less then the full payment amount.
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November 5, 2007 at 12:01 PM #96004
patientlywaiting
ParticipantAdding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you're looking to pay off early, such a habit is the way to go.
The key here is extra payments (more initial cash outflow for the borrower). Simply making two payments won't cut it. I think that Alex was looking for some "magic."
Incidentally, I hear that some lenders refuse anything less then the full payment amount.
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November 5, 2007 at 11:53 AM #95983
NotCranky
ParticipantNo offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
No problem …I just responded to you to see if I could sucker someone into putting their two cents in on the other thread…with attention to the current focus. I just wonder why software like that would cost as much as a loaded auto- cad for instance? If the program did work it isn’t very sophisticated technologically. It should be free.
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November 5, 2007 at 11:53 AM #95990
NotCranky
ParticipantNo offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
No problem …I just responded to you to see if I could sucker someone into putting their two cents in on the other thread…with attention to the current focus. I just wonder why software like that would cost as much as a loaded auto- cad for instance? If the program did work it isn’t very sophisticated technologically. It should be free.
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November 5, 2007 at 11:53 AM #96000
NotCranky
ParticipantNo offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
No problem …I just responded to you to see if I could sucker someone into putting their two cents in on the other thread…with attention to the current focus. I just wonder why software like that would cost as much as a loaded auto- cad for instance? If the program did work it isn’t very sophisticated technologically. It should be free.
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November 5, 2007 at 12:08 PM #95932
Raybyrnes
ParticipantDaniel
I would not go buying the software youa re referring to but I am going to point out somewhting with respect to human behavior.My wife wnet on a few diets and tried to do it on her own. It worked OK. She joined weightwatchers and paid money. She lost the weight and then got the luxury of not having to pay as long as she kept to her target weight. This is an empowering event. She gained control and simultaneously was penalized if she fell off.
Now you could easliy argue that she never needed to pay for weight watchers but the reality was that she was paying to achieve a certain outcome.
If someone who was disorganized about finances paid for a program and by paying were diciplined moving forward becasue they paid big bucks for a program than maybe they to achieved the desired outcome.
I am not going to judge as critically as others. Not everyone is good with finance or organized with their money.
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November 5, 2007 at 12:08 PM #95992
Raybyrnes
ParticipantDaniel
I would not go buying the software youa re referring to but I am going to point out somewhting with respect to human behavior.My wife wnet on a few diets and tried to do it on her own. It worked OK. She joined weightwatchers and paid money. She lost the weight and then got the luxury of not having to pay as long as she kept to her target weight. This is an empowering event. She gained control and simultaneously was penalized if she fell off.
Now you could easliy argue that she never needed to pay for weight watchers but the reality was that she was paying to achieve a certain outcome.
If someone who was disorganized about finances paid for a program and by paying were diciplined moving forward becasue they paid big bucks for a program than maybe they to achieved the desired outcome.
I am not going to judge as critically as others. Not everyone is good with finance or organized with their money.
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November 5, 2007 at 12:08 PM #95999
Raybyrnes
ParticipantDaniel
I would not go buying the software youa re referring to but I am going to point out somewhting with respect to human behavior.My wife wnet on a few diets and tried to do it on her own. It worked OK. She joined weightwatchers and paid money. She lost the weight and then got the luxury of not having to pay as long as she kept to her target weight. This is an empowering event. She gained control and simultaneously was penalized if she fell off.
Now you could easliy argue that she never needed to pay for weight watchers but the reality was that she was paying to achieve a certain outcome.
If someone who was disorganized about finances paid for a program and by paying were diciplined moving forward becasue they paid big bucks for a program than maybe they to achieved the desired outcome.
I am not going to judge as critically as others. Not everyone is good with finance or organized with their money.
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November 5, 2007 at 12:08 PM #96009
Raybyrnes
ParticipantDaniel
I would not go buying the software youa re referring to but I am going to point out somewhting with respect to human behavior.My wife wnet on a few diets and tried to do it on her own. It worked OK. She joined weightwatchers and paid money. She lost the weight and then got the luxury of not having to pay as long as she kept to her target weight. This is an empowering event. She gained control and simultaneously was penalized if she fell off.
Now you could easliy argue that she never needed to pay for weight watchers but the reality was that she was paying to achieve a certain outcome.
If someone who was disorganized about finances paid for a program and by paying were diciplined moving forward becasue they paid big bucks for a program than maybe they to achieved the desired outcome.
I am not going to judge as critically as others. Not everyone is good with finance or organized with their money.
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November 5, 2007 at 10:41 AM #95973
Daniel
ParticipantRustico,
No offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
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November 5, 2007 at 10:41 AM #95978
Daniel
ParticipantRustico,
No offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
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November 5, 2007 at 10:41 AM #95989
Daniel
ParticipantRustico,
No offense meant to those posting on that thread, I’m aware the topic has drifted. But I guess I do feel pity for the poor suckers, wherever they may be, who paid the big bucks for that piece of software…
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November 5, 2007 at 10:34 AM #95969
NotCranky
Participant“let me address the miracle software thing discussed on a nearby thread.”
That topic is not being discussed on that thread so much any more. It is more about the, value or lack of, in paying off a house early, by any means.
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November 5, 2007 at 10:34 AM #95975
NotCranky
Participant“let me address the miracle software thing discussed on a nearby thread.”
That topic is not being discussed on that thread so much any more. It is more about the, value or lack of, in paying off a house early, by any means.
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November 5, 2007 at 10:34 AM #95985
NotCranky
Participant“let me address the miracle software thing discussed on a nearby thread.”
That topic is not being discussed on that thread so much any more. It is more about the, value or lack of, in paying off a house early, by any means.
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November 5, 2007 at 12:52 PM #95953
Wickedheart
Participant“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.”
“If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can’t arbitrarily select to do it or not on your own.”
There are 52 weeks in a year so it would work out to 26 bi-weekly payments in a year. That would pretty much be like making one extra monthly payment a year.
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November 5, 2007 at 12:52 PM #96013
Wickedheart
Participant“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.”
“If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can’t arbitrarily select to do it or not on your own.”
There are 52 weeks in a year so it would work out to 26 bi-weekly payments in a year. That would pretty much be like making one extra monthly payment a year.
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November 5, 2007 at 12:52 PM #96018
Wickedheart
Participant“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.”
“If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can’t arbitrarily select to do it or not on your own.”
There are 52 weeks in a year so it would work out to 26 bi-weekly payments in a year. That would pretty much be like making one extra monthly payment a year.
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November 5, 2007 at 12:52 PM #96028
Wickedheart
Participant“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.”
“If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can’t arbitrarily select to do it or not on your own.”
There are 52 weeks in a year so it would work out to 26 bi-weekly payments in a year. That would pretty much be like making one extra monthly payment a year.
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October 7, 2009 at 4:20 PM #465338
OgreB
Participantdelete read other comments that pointed out what i was saying.
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October 7, 2009 at 4:20 PM #465526
OgreB
Participantdelete read other comments that pointed out what i was saying.
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October 7, 2009 at 4:20 PM #465880
OgreB
Participantdelete read other comments that pointed out what i was saying.
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October 7, 2009 at 4:20 PM #465953
OgreB
Participantdelete read other comments that pointed out what i was saying.
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October 7, 2009 at 4:20 PM #466164
OgreB
Participantdelete read other comments that pointed out what i was saying.
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November 5, 2007 at 10:29 AM #95965
patientlywaiting
ParticipantI 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.
If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can't arbitrarily select to do it or not on your own.
If it's some service or software problem then it's bull.
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November 5, 2007 at 10:29 AM #95972
patientlywaiting
ParticipantI 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.
If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can't arbitrarily select to do it or not on your own.
If it's some service or software problem then it's bull.
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November 5, 2007 at 10:29 AM #95980
patientlywaiting
ParticipantI 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.
If the lender offers that option, then yes, it works. But you have to pay 24 times per year. You can't arbitrarily select to do it or not on your own.
If it's some service or software problem then it's bull.
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November 5, 2007 at 9:56 AM #95940
golfproz
ParticipantI 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.
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November 5, 2007 at 9:56 AM #95947
golfproz
ParticipantI 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.
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November 5, 2007 at 9:56 AM #95954
golfproz
ParticipantI 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.
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November 5, 2007 at 12:58 PM #95957
Raybyrnes
Participantpatientlywaiting
“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”
That’s not necessarily true. It increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
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November 5, 2007 at 1:12 PM #95960
patientlywaiting
ParticipantIt increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
No it doesn't. Test it. I tested it with my lender (Wells Fargo) and it makes no difference.
It also makes no difference if you pay your mortgage early (for example pay December's payment in October). Since I pay electronically, I schedule the payment only a couple of days before it's absolutely due (generally the 15th).
Please test it with your lender and report back.
(I'm talking about timing of mortgage payments here, NOT making any additional principal payments).
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November 5, 2007 at 2:17 PM #96003
Raybyrnes
Participantpatientlywaiting
You need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
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November 5, 2007 at 2:28 PM #96011
patientlywaiting
ParticipantYou need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
That equates to making an ADDITIONAL principal payment. You will still owe the full of next month's payment. If your cash flow is limited, that will not work.
To address the OP's question, for example, if your P&I is $1000/month. There is no way you can rearrange (slice and dice into more than 12 payments) paying $12,000 total for the year and reduce the principal more than paying $1000/mo when due. Of course, if you pay $12,500 then your principal would be reduced some more — but that is only because you made that extra $500 payment. That is a problem if you don't have the extra $500.
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November 5, 2007 at 2:28 PM #96073
patientlywaiting
ParticipantYou need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
That equates to making an ADDITIONAL principal payment. You will still owe the full of next month's payment. If your cash flow is limited, that will not work.
To address the OP's question, for example, if your P&I is $1000/month. There is no way you can rearrange (slice and dice into more than 12 payments) paying $12,000 total for the year and reduce the principal more than paying $1000/mo when due. Of course, if you pay $12,500 then your principal would be reduced some more — but that is only because you made that extra $500 payment. That is a problem if you don't have the extra $500.
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November 5, 2007 at 2:28 PM #96079
patientlywaiting
ParticipantYou need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
That equates to making an ADDITIONAL principal payment. You will still owe the full of next month's payment. If your cash flow is limited, that will not work.
To address the OP's question, for example, if your P&I is $1000/month. There is no way you can rearrange (slice and dice into more than 12 payments) paying $12,000 total for the year and reduce the principal more than paying $1000/mo when due. Of course, if you pay $12,500 then your principal would be reduced some more — but that is only because you made that extra $500 payment. That is a problem if you don't have the extra $500.
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November 5, 2007 at 2:28 PM #96087
patientlywaiting
ParticipantYou need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
That equates to making an ADDITIONAL principal payment. You will still owe the full of next month's payment. If your cash flow is limited, that will not work.
To address the OP's question, for example, if your P&I is $1000/month. There is no way you can rearrange (slice and dice into more than 12 payments) paying $12,000 total for the year and reduce the principal more than paying $1000/mo when due. Of course, if you pay $12,500 then your principal would be reduced some more — but that is only because you made that extra $500 payment. That is a problem if you don't have the extra $500.
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November 5, 2007 at 2:17 PM #96065
Raybyrnes
Participantpatientlywaiting
You need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
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November 5, 2007 at 2:17 PM #96071
Raybyrnes
Participantpatientlywaiting
You need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
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November 5, 2007 at 2:17 PM #96080
Raybyrnes
Participantpatientlywaiting
You need to indicate to the lender that you wnat overage applied to the balance otherwise they are simply going to apply it towards the next months payment.
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November 5, 2007 at 1:12 PM #96021
patientlywaiting
ParticipantIt increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
No it doesn't. Test it. I tested it with my lender (Wells Fargo) and it makes no difference.
It also makes no difference if you pay your mortgage early (for example pay December's payment in October). Since I pay electronically, I schedule the payment only a couple of days before it's absolutely due (generally the 15th).
Please test it with your lender and report back.
(I'm talking about timing of mortgage payments here, NOT making any additional principal payments).
-
November 5, 2007 at 1:12 PM #96027
patientlywaiting
ParticipantIt increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
No it doesn't. Test it. I tested it with my lender (Wells Fargo) and it makes no difference.
It also makes no difference if you pay your mortgage early (for example pay December's payment in October). Since I pay electronically, I schedule the payment only a couple of days before it's absolutely due (generally the 15th).
Please test it with your lender and report back.
(I'm talking about timing of mortgage payments here, NOT making any additional principal payments).
-
November 5, 2007 at 1:12 PM #96034
patientlywaiting
ParticipantIt increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
No it doesn't. Test it. I tested it with my lender (Wells Fargo) and it makes no difference.
It also makes no difference if you pay your mortgage early (for example pay December's payment in October). Since I pay electronically, I schedule the payment only a couple of days before it's absolutely due (generally the 15th).
Please test it with your lender and report back.
(I'm talking about timing of mortgage payments here, NOT making any additional principal payments).
-
November 5, 2007 at 1:21 PM #95964
NotCranky
Participant“Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.”
That is great if you are in a position to find a house that you, and better half if applicable, will accept and can qualify for it on a fifteen year loan. The flexibility of paying a lot in a good streak and the safety a smaller payment otherwise is more practical for many people.
-
November 5, 2007 at 6:53 PM #96066
cr
ParticipantRustico, agreed, and like I said, I’m no expert, it just sounds like from what I read either a shady scam, or more risky for your credit score, and in terms of how much debt you incur in addition to the house to make it worth it.
In the other thread I had commented that if there was truly a way to pay a mortgage off in 1/3 the time it would be bigger than a video on youtube. Then again maybe I’m not smart enough to see how this could work. I can accept that.
-
November 5, 2007 at 7:18 PM #96078
Raybyrnes
Participantcooprider14
I have to say that I have not done the proof and right now but this is not as uncommon as people are making it out to be. It is used in Australia and Europe.I wouldn’t be so skeptical of different techniques. There are a lot of Diesel cars in Europe that have not made their way to the States and they are far more efficient and practical. If they show up and Youtube that means they are a scam???
You guys are focusing on the wrong side of this pay down deal. You are only looking at the rate. To equate a monthly payment it is rate times the balance. If my payment goes in first and immediately reduces my outstanding principal balance at the beginining of the month from 100000 to 97000 on the First Day of the month, and then as the month goes on my balance goes from 0 to 3000 at the end of the month on the heloc so that my daily interest can actually go down on then net. It is complicated and requires timing your payment and manging your cash flow. Again I am not endorsing the product but I think I get how it works.
Quick math 4% interest on 100000K loan is $4000. Time the payments so that you are putting 100% of payment immediately toward balance so that you are systematically lowering the average outstanding balance throughout the year to 90000 and you can have a higher rate of %4.44 and still only pay 4000 in interest.
I think this is the concept. There more to it than some people of you are dismissing. But it requires more effort than it is worth for the average Joe.
-
November 5, 2007 at 7:41 PM #96086
jamsvet
ParticipantI’ve lurked a long time and thought I should throw in my two cents worth. A good way to pay down the mortgage is to pay the next months principle along with this months payment. Initially, the payment is comprised of mostly interest with little principle, the extra is not a big stretch. As the years go by, the principal payment increases but theoretically so does your income. You can chose to make the extra payment or not each month. If you do it this way, its a 15 year mortgage.
-
November 5, 2007 at 8:01 PM #96090
DCRogers
Participantjamsvet has it right… It’s called the “Bankers Secret”; another formulation is: look at your principal payment, and pay double that (with the interest) each month.
Two comments.
1) You don’t need software to do this. Just the cash to pre-pay.
2) You can’t get a significant advantage with timing schemes. If you want to shorten your mortgage, here’s the shocking tip: pay more each month.
The worst effect of this damn bubble is that people saw neighbors buying Escalades and yachts with their HELOCs and, rather than being reinforced into paying their debts off, one painful dollar at a time, threw caution to the wind and joined the party. A dead-man’s party.
DCRogers
-
November 5, 2007 at 9:15 PM #96102
Carlsbadliving
ParticipantFYI: This was in Men’s Health magazine. it specifically says:
“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
-
November 5, 2007 at 10:28 PM #96130
cr
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
Has anyone here actually done this?
-
November 5, 2007 at 11:23 PM #96134
patientlywaiting
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
I tried so I know well. No. They do not.
Here’s an example of a $100,000 loan at 10%. It does not matter when you make the monthly payments. You owe 1 month month interest regardless of when you make the payment.
For the year, your total PI payments are $10,530.86. Unless your total payments are MORE than that for the year, there is NO WAY your principal balance can be reduced any faster.
The interest payments will always = Beginning Principal * interest rate / 12. The extra goes to principal. That is regardless of when you make your mortgage payments.
If you cut your monthly payment in 2 halves, the first half payment will be applied all to interest with no affect on your principal balance.
Try it with your own mortgage.
Beginning balance before each payment of $877.57
$ 100,000.00
99,955.76
99,911.15
99,866.18
99,820.82
99,775.09
99,728.98
99,682.48
99,635.60
99,588.32
99,540.65
99,492.59Interest Payments
$833.33
832.96
832.59
832.22
831.84
831.46
831.07
830.69
830.30
829.90
829.51
829.10Principal Payments
$44.24
44.61
44.98
45.35
45.73
46.11
46.50
46.88
47.27
47.67
48.07
48.47 -
November 5, 2007 at 11:23 PM #96197
patientlywaiting
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
I tried so I know well. No. They do not.
Here’s an example of a $100,000 loan at 10%. It does not matter when you make the monthly payments. You owe 1 month month interest regardless of when you make the payment.
For the year, your total PI payments are $10,530.86. Unless your total payments are MORE than that for the year, there is NO WAY your principal balance can be reduced any faster.
The interest payments will always = Beginning Principal * interest rate / 12. The extra goes to principal. That is regardless of when you make your mortgage payments.
If you cut your monthly payment in 2 halves, the first half payment will be applied all to interest with no affect on your principal balance.
Try it with your own mortgage.
Beginning balance before each payment of $877.57
$ 100,000.00
99,955.76
99,911.15
99,866.18
99,820.82
99,775.09
99,728.98
99,682.48
99,635.60
99,588.32
99,540.65
99,492.59Interest Payments
$833.33
832.96
832.59
832.22
831.84
831.46
831.07
830.69
830.30
829.90
829.51
829.10Principal Payments
$44.24
44.61
44.98
45.35
45.73
46.11
46.50
46.88
47.27
47.67
48.07
48.47 -
November 5, 2007 at 11:23 PM #96204
patientlywaiting
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
I tried so I know well. No. They do not.
Here’s an example of a $100,000 loan at 10%. It does not matter when you make the monthly payments. You owe 1 month month interest regardless of when you make the payment.
For the year, your total PI payments are $10,530.86. Unless your total payments are MORE than that for the year, there is NO WAY your principal balance can be reduced any faster.
The interest payments will always = Beginning Principal * interest rate / 12. The extra goes to principal. That is regardless of when you make your mortgage payments.
If you cut your monthly payment in 2 halves, the first half payment will be applied all to interest with no affect on your principal balance.
Try it with your own mortgage.
Beginning balance before each payment of $877.57
$ 100,000.00
99,955.76
99,911.15
99,866.18
99,820.82
99,775.09
99,728.98
99,682.48
99,635.60
99,588.32
99,540.65
99,492.59Interest Payments
$833.33
832.96
832.59
832.22
831.84
831.46
831.07
830.69
830.30
829.90
829.51
829.10Principal Payments
$44.24
44.61
44.98
45.35
45.73
46.11
46.50
46.88
47.27
47.67
48.07
48.47 -
November 5, 2007 at 11:23 PM #96211
patientlywaiting
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
I tried so I know well. No. They do not.
Here’s an example of a $100,000 loan at 10%. It does not matter when you make the monthly payments. You owe 1 month month interest regardless of when you make the payment.
For the year, your total PI payments are $10,530.86. Unless your total payments are MORE than that for the year, there is NO WAY your principal balance can be reduced any faster.
The interest payments will always = Beginning Principal * interest rate / 12. The extra goes to principal. That is regardless of when you make your mortgage payments.
If you cut your monthly payment in 2 halves, the first half payment will be applied all to interest with no affect on your principal balance.
Try it with your own mortgage.
Beginning balance before each payment of $877.57
$ 100,000.00
99,955.76
99,911.15
99,866.18
99,820.82
99,775.09
99,728.98
99,682.48
99,635.60
99,588.32
99,540.65
99,492.59Interest Payments
$833.33
832.96
832.59
832.22
831.84
831.46
831.07
830.69
830.30
829.90
829.51
829.10Principal Payments
$44.24
44.61
44.98
45.35
45.73
46.11
46.50
46.88
47.27
47.67
48.07
48.47 -
November 5, 2007 at 10:28 PM #96193
cr
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
Has anyone here actually done this?
-
November 5, 2007 at 10:28 PM #96200
cr
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
Has anyone here actually done this?
-
November 5, 2007 at 10:28 PM #96207
cr
Participant“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
Has anyone here actually done this?
-
November 5, 2007 at 9:15 PM #96165
Carlsbadliving
ParticipantFYI: This was in Men’s Health magazine. it specifically says:
“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
-
November 5, 2007 at 9:15 PM #96171
Carlsbadliving
ParticipantFYI: This was in Men’s Health magazine. it specifically says:
“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
-
November 5, 2007 at 9:15 PM #96180
Carlsbadliving
ParticipantFYI: This was in Men’s Health magazine. it specifically says:
“Banks compound interest every day, so not waiting till the midmonth due date will save you thousands over the course of your loan. Split your payment in half and send your bank a check every 2 weeks; it will cut 10 years off the life of a 30-year loan.”
-
November 5, 2007 at 8:01 PM #96153
DCRogers
Participantjamsvet has it right… It’s called the “Bankers Secret”; another formulation is: look at your principal payment, and pay double that (with the interest) each month.
Two comments.
1) You don’t need software to do this. Just the cash to pre-pay.
2) You can’t get a significant advantage with timing schemes. If you want to shorten your mortgage, here’s the shocking tip: pay more each month.
The worst effect of this damn bubble is that people saw neighbors buying Escalades and yachts with their HELOCs and, rather than being reinforced into paying their debts off, one painful dollar at a time, threw caution to the wind and joined the party. A dead-man’s party.
DCRogers
-
November 5, 2007 at 8:01 PM #96159
DCRogers
Participantjamsvet has it right… It’s called the “Bankers Secret”; another formulation is: look at your principal payment, and pay double that (with the interest) each month.
Two comments.
1) You don’t need software to do this. Just the cash to pre-pay.
2) You can’t get a significant advantage with timing schemes. If you want to shorten your mortgage, here’s the shocking tip: pay more each month.
The worst effect of this damn bubble is that people saw neighbors buying Escalades and yachts with their HELOCs and, rather than being reinforced into paying their debts off, one painful dollar at a time, threw caution to the wind and joined the party. A dead-man’s party.
DCRogers
-
November 5, 2007 at 8:01 PM #96168
DCRogers
Participantjamsvet has it right… It’s called the “Bankers Secret”; another formulation is: look at your principal payment, and pay double that (with the interest) each month.
Two comments.
1) You don’t need software to do this. Just the cash to pre-pay.
2) You can’t get a significant advantage with timing schemes. If you want to shorten your mortgage, here’s the shocking tip: pay more each month.
The worst effect of this damn bubble is that people saw neighbors buying Escalades and yachts with their HELOCs and, rather than being reinforced into paying their debts off, one painful dollar at a time, threw caution to the wind and joined the party. A dead-man’s party.
DCRogers
-
November 6, 2007 at 6:54 AM #96166
Raybyrnes
Participantjamsvet
I think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic. -
November 6, 2007 at 7:06 AM #96178
Coronita
ParticipantI think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic.
Raybyrnes,
I guess it depends on how much churn your mutual/index fund does in terms of cap gains/dividends distribution. Although ideally it's 10%, reality is there probably will be some distribution at which you'll have to pay taxes. Hence, it's not really 10% gain versus 6%. I'm not sure exactly where my own cutoff is, but I think since my mortgage is 5.5% range, there's slightly more room for me to play this game. Still, I was counting on interest rates on tradition savings/cd's to go up as part of this, so that I would hold some amount in equities and some in short term CD's. But obviously with the fed rate cuts, kinda throws a wrinkle. So to be safe, I've started to pay more of my principle off each month.
-
November 6, 2007 at 7:15 AM #96186
Raybyrnes
ParticipantI am just using an example with 6% but I felt the the cap gains wash out with the deduction for interest. I just wanted to keep the example simple. I am certain we can complicate this with risk analyis, risk arbitrage and a lot of other variables.
Yes I understand that paying down the mortgage is risk free vs investing in the market carries risk premium. But if we are talking baout 10 years plus the risk seems to go down pretty dramatically.
-
November 6, 2007 at 7:58 AM #96210
NYCLurker
ParticipantIt all depends on your loan!!!
I started my career as an actuarial student, and somewhere I still have my really scary textbook on actuarial mathematics — annuity pricing/amortization. A level payment fixed period annuity (e.g. mortgage) can be priced with any number of variables and the monthly payment (loan amount) will of course vary based on something as simple as whether the payment is made at the beginning, end, or middle of the month.
But your bank is usually not sitting around repricing your conventional mortgage (and on what date the interest due accrues) just because you sent them 2 checks instead of one WITHIN a given period.
Other types of loans, especially something like a line of credit with a recalculated daily balance, WOULD however benefit from multiple payments within a month.
But, now with electronic banking there is a bit more flexibility for regular mortgages. Chase for example allows you to make an online payment and specify either:
– pay your regular mortgage payment
– prepay a future regular mortgage payment
– pay additional principal within this period -
November 6, 2007 at 8:22 AM #96218
Raybyrnes
ParticipantNYCLurker
That’s exactly the same as my options for my student loans. The only thing I have to do is indicate where I want the payments to go. My default is to pay down balance. But if I were a teacher who gets paid over 9 months and I didn’t want to make payments over teh summer I could pay in advance. Technology is awesome.
-
November 6, 2007 at 8:22 AM #96281
Raybyrnes
ParticipantNYCLurker
That’s exactly the same as my options for my student loans. The only thing I have to do is indicate where I want the payments to go. My default is to pay down balance. But if I were a teacher who gets paid over 9 months and I didn’t want to make payments over teh summer I could pay in advance. Technology is awesome.
-
November 6, 2007 at 8:22 AM #96287
Raybyrnes
ParticipantNYCLurker
That’s exactly the same as my options for my student loans. The only thing I have to do is indicate where I want the payments to go. My default is to pay down balance. But if I were a teacher who gets paid over 9 months and I didn’t want to make payments over teh summer I could pay in advance. Technology is awesome.
-
November 6, 2007 at 8:22 AM #96295
Raybyrnes
ParticipantNYCLurker
That’s exactly the same as my options for my student loans. The only thing I have to do is indicate where I want the payments to go. My default is to pay down balance. But if I were a teacher who gets paid over 9 months and I didn’t want to make payments over teh summer I could pay in advance. Technology is awesome.
-
November 6, 2007 at 7:58 AM #96273
NYCLurker
ParticipantIt all depends on your loan!!!
I started my career as an actuarial student, and somewhere I still have my really scary textbook on actuarial mathematics — annuity pricing/amortization. A level payment fixed period annuity (e.g. mortgage) can be priced with any number of variables and the monthly payment (loan amount) will of course vary based on something as simple as whether the payment is made at the beginning, end, or middle of the month.
But your bank is usually not sitting around repricing your conventional mortgage (and on what date the interest due accrues) just because you sent them 2 checks instead of one WITHIN a given period.
Other types of loans, especially something like a line of credit with a recalculated daily balance, WOULD however benefit from multiple payments within a month.
But, now with electronic banking there is a bit more flexibility for regular mortgages. Chase for example allows you to make an online payment and specify either:
– pay your regular mortgage payment
– prepay a future regular mortgage payment
– pay additional principal within this period -
November 6, 2007 at 7:58 AM #96279
NYCLurker
ParticipantIt all depends on your loan!!!
I started my career as an actuarial student, and somewhere I still have my really scary textbook on actuarial mathematics — annuity pricing/amortization. A level payment fixed period annuity (e.g. mortgage) can be priced with any number of variables and the monthly payment (loan amount) will of course vary based on something as simple as whether the payment is made at the beginning, end, or middle of the month.
But your bank is usually not sitting around repricing your conventional mortgage (and on what date the interest due accrues) just because you sent them 2 checks instead of one WITHIN a given period.
Other types of loans, especially something like a line of credit with a recalculated daily balance, WOULD however benefit from multiple payments within a month.
But, now with electronic banking there is a bit more flexibility for regular mortgages. Chase for example allows you to make an online payment and specify either:
– pay your regular mortgage payment
– prepay a future regular mortgage payment
– pay additional principal within this period -
November 6, 2007 at 7:58 AM #96288
NYCLurker
ParticipantIt all depends on your loan!!!
I started my career as an actuarial student, and somewhere I still have my really scary textbook on actuarial mathematics — annuity pricing/amortization. A level payment fixed period annuity (e.g. mortgage) can be priced with any number of variables and the monthly payment (loan amount) will of course vary based on something as simple as whether the payment is made at the beginning, end, or middle of the month.
But your bank is usually not sitting around repricing your conventional mortgage (and on what date the interest due accrues) just because you sent them 2 checks instead of one WITHIN a given period.
Other types of loans, especially something like a line of credit with a recalculated daily balance, WOULD however benefit from multiple payments within a month.
But, now with electronic banking there is a bit more flexibility for regular mortgages. Chase for example allows you to make an online payment and specify either:
– pay your regular mortgage payment
– prepay a future regular mortgage payment
– pay additional principal within this period -
November 6, 2007 at 7:15 AM #96246
Raybyrnes
ParticipantI am just using an example with 6% but I felt the the cap gains wash out with the deduction for interest. I just wanted to keep the example simple. I am certain we can complicate this with risk analyis, risk arbitrage and a lot of other variables.
Yes I understand that paying down the mortgage is risk free vs investing in the market carries risk premium. But if we are talking baout 10 years plus the risk seems to go down pretty dramatically.
-
November 6, 2007 at 7:15 AM #96255
Raybyrnes
ParticipantI am just using an example with 6% but I felt the the cap gains wash out with the deduction for interest. I just wanted to keep the example simple. I am certain we can complicate this with risk analyis, risk arbitrage and a lot of other variables.
Yes I understand that paying down the mortgage is risk free vs investing in the market carries risk premium. But if we are talking baout 10 years plus the risk seems to go down pretty dramatically.
-
November 6, 2007 at 7:15 AM #96263
Raybyrnes
ParticipantI am just using an example with 6% but I felt the the cap gains wash out with the deduction for interest. I just wanted to keep the example simple. I am certain we can complicate this with risk analyis, risk arbitrage and a lot of other variables.
Yes I understand that paying down the mortgage is risk free vs investing in the market carries risk premium. But if we are talking baout 10 years plus the risk seems to go down pretty dramatically.
-
November 6, 2007 at 7:06 AM #96241
Coronita
ParticipantI think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic.
Raybyrnes,
I guess it depends on how much churn your mutual/index fund does in terms of cap gains/dividends distribution. Although ideally it's 10%, reality is there probably will be some distribution at which you'll have to pay taxes. Hence, it's not really 10% gain versus 6%. I'm not sure exactly where my own cutoff is, but I think since my mortgage is 5.5% range, there's slightly more room for me to play this game. Still, I was counting on interest rates on tradition savings/cd's to go up as part of this, so that I would hold some amount in equities and some in short term CD's. But obviously with the fed rate cuts, kinda throws a wrinkle. So to be safe, I've started to pay more of my principle off each month.
-
November 6, 2007 at 7:06 AM #96249
Coronita
ParticipantI think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic.
Raybyrnes,
I guess it depends on how much churn your mutual/index fund does in terms of cap gains/dividends distribution. Although ideally it's 10%, reality is there probably will be some distribution at which you'll have to pay taxes. Hence, it's not really 10% gain versus 6%. I'm not sure exactly where my own cutoff is, but I think since my mortgage is 5.5% range, there's slightly more room for me to play this game. Still, I was counting on interest rates on tradition savings/cd's to go up as part of this, so that I would hold some amount in equities and some in short term CD's. But obviously with the fed rate cuts, kinda throws a wrinkle. So to be safe, I've started to pay more of my principle off each month.
-
November 6, 2007 at 7:06 AM #96254
Coronita
ParticipantI think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic.
Raybyrnes,
I guess it depends on how much churn your mutual/index fund does in terms of cap gains/dividends distribution. Although ideally it's 10%, reality is there probably will be some distribution at which you'll have to pay taxes. Hence, it's not really 10% gain versus 6%. I'm not sure exactly where my own cutoff is, but I think since my mortgage is 5.5% range, there's slightly more room for me to play this game. Still, I was counting on interest rates on tradition savings/cd's to go up as part of this, so that I would hold some amount in equities and some in short term CD's. But obviously with the fed rate cuts, kinda throws a wrinkle. So to be safe, I've started to pay more of my principle off each month.
-
November 6, 2007 at 6:54 AM #96229
Raybyrnes
Participantjamsvet
I think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic. -
November 6, 2007 at 6:54 AM #96236
Raybyrnes
Participantjamsvet
I think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic. -
November 6, 2007 at 6:54 AM #96243
Raybyrnes
Participantjamsvet
I think this is a good suggestion but if I had a choice of putting extra money toward my mortgage payment at 6% or throwing it into an index mutual fund I would probably choose to throw it in the index fund. Historically the mutual fund will get you 10% and at a fixed rate of 6% I feel I benefit from the laws of compunding. ANything that I am missing in this logic. -
November 5, 2007 at 7:41 PM #96149
jamsvet
ParticipantI’ve lurked a long time and thought I should throw in my two cents worth. A good way to pay down the mortgage is to pay the next months principle along with this months payment. Initially, the payment is comprised of mostly interest with little principle, the extra is not a big stretch. As the years go by, the principal payment increases but theoretically so does your income. You can chose to make the extra payment or not each month. If you do it this way, its a 15 year mortgage.
-
November 5, 2007 at 7:41 PM #96155
jamsvet
ParticipantI’ve lurked a long time and thought I should throw in my two cents worth. A good way to pay down the mortgage is to pay the next months principle along with this months payment. Initially, the payment is comprised of mostly interest with little principle, the extra is not a big stretch. As the years go by, the principal payment increases but theoretically so does your income. You can chose to make the extra payment or not each month. If you do it this way, its a 15 year mortgage.
-
November 5, 2007 at 7:41 PM #96164
jamsvet
ParticipantI’ve lurked a long time and thought I should throw in my two cents worth. A good way to pay down the mortgage is to pay the next months principle along with this months payment. Initially, the payment is comprised of mostly interest with little principle, the extra is not a big stretch. As the years go by, the principal payment increases but theoretically so does your income. You can chose to make the extra payment or not each month. If you do it this way, its a 15 year mortgage.
-
November 5, 2007 at 7:18 PM #96141
Raybyrnes
Participantcooprider14
I have to say that I have not done the proof and right now but this is not as uncommon as people are making it out to be. It is used in Australia and Europe.I wouldn’t be so skeptical of different techniques. There are a lot of Diesel cars in Europe that have not made their way to the States and they are far more efficient and practical. If they show up and Youtube that means they are a scam???
You guys are focusing on the wrong side of this pay down deal. You are only looking at the rate. To equate a monthly payment it is rate times the balance. If my payment goes in first and immediately reduces my outstanding principal balance at the beginining of the month from 100000 to 97000 on the First Day of the month, and then as the month goes on my balance goes from 0 to 3000 at the end of the month on the heloc so that my daily interest can actually go down on then net. It is complicated and requires timing your payment and manging your cash flow. Again I am not endorsing the product but I think I get how it works.
Quick math 4% interest on 100000K loan is $4000. Time the payments so that you are putting 100% of payment immediately toward balance so that you are systematically lowering the average outstanding balance throughout the year to 90000 and you can have a higher rate of %4.44 and still only pay 4000 in interest.
I think this is the concept. There more to it than some people of you are dismissing. But it requires more effort than it is worth for the average Joe.
-
November 5, 2007 at 7:18 PM #96148
Raybyrnes
Participantcooprider14
I have to say that I have not done the proof and right now but this is not as uncommon as people are making it out to be. It is used in Australia and Europe.I wouldn’t be so skeptical of different techniques. There are a lot of Diesel cars in Europe that have not made their way to the States and they are far more efficient and practical. If they show up and Youtube that means they are a scam???
You guys are focusing on the wrong side of this pay down deal. You are only looking at the rate. To equate a monthly payment it is rate times the balance. If my payment goes in first and immediately reduces my outstanding principal balance at the beginining of the month from 100000 to 97000 on the First Day of the month, and then as the month goes on my balance goes from 0 to 3000 at the end of the month on the heloc so that my daily interest can actually go down on then net. It is complicated and requires timing your payment and manging your cash flow. Again I am not endorsing the product but I think I get how it works.
Quick math 4% interest on 100000K loan is $4000. Time the payments so that you are putting 100% of payment immediately toward balance so that you are systematically lowering the average outstanding balance throughout the year to 90000 and you can have a higher rate of %4.44 and still only pay 4000 in interest.
I think this is the concept. There more to it than some people of you are dismissing. But it requires more effort than it is worth for the average Joe.
-
November 5, 2007 at 7:18 PM #96156
Raybyrnes
Participantcooprider14
I have to say that I have not done the proof and right now but this is not as uncommon as people are making it out to be. It is used in Australia and Europe.I wouldn’t be so skeptical of different techniques. There are a lot of Diesel cars in Europe that have not made their way to the States and they are far more efficient and practical. If they show up and Youtube that means they are a scam???
You guys are focusing on the wrong side of this pay down deal. You are only looking at the rate. To equate a monthly payment it is rate times the balance. If my payment goes in first and immediately reduces my outstanding principal balance at the beginining of the month from 100000 to 97000 on the First Day of the month, and then as the month goes on my balance goes from 0 to 3000 at the end of the month on the heloc so that my daily interest can actually go down on then net. It is complicated and requires timing your payment and manging your cash flow. Again I am not endorsing the product but I think I get how it works.
Quick math 4% interest on 100000K loan is $4000. Time the payments so that you are putting 100% of payment immediately toward balance so that you are systematically lowering the average outstanding balance throughout the year to 90000 and you can have a higher rate of %4.44 and still only pay 4000 in interest.
I think this is the concept. There more to it than some people of you are dismissing. But it requires more effort than it is worth for the average Joe.
-
November 5, 2007 at 6:53 PM #96129
cr
ParticipantRustico, agreed, and like I said, I’m no expert, it just sounds like from what I read either a shady scam, or more risky for your credit score, and in terms of how much debt you incur in addition to the house to make it worth it.
In the other thread I had commented that if there was truly a way to pay a mortgage off in 1/3 the time it would be bigger than a video on youtube. Then again maybe I’m not smart enough to see how this could work. I can accept that.
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November 5, 2007 at 6:53 PM #96136
cr
ParticipantRustico, agreed, and like I said, I’m no expert, it just sounds like from what I read either a shady scam, or more risky for your credit score, and in terms of how much debt you incur in addition to the house to make it worth it.
In the other thread I had commented that if there was truly a way to pay a mortgage off in 1/3 the time it would be bigger than a video on youtube. Then again maybe I’m not smart enough to see how this could work. I can accept that.
-
November 5, 2007 at 6:53 PM #96144
cr
ParticipantRustico, agreed, and like I said, I’m no expert, it just sounds like from what I read either a shady scam, or more risky for your credit score, and in terms of how much debt you incur in addition to the house to make it worth it.
In the other thread I had commented that if there was truly a way to pay a mortgage off in 1/3 the time it would be bigger than a video on youtube. Then again maybe I’m not smart enough to see how this could work. I can accept that.
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November 5, 2007 at 1:21 PM #96025
NotCranky
Participant“Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.”
That is great if you are in a position to find a house that you, and better half if applicable, will accept and can qualify for it on a fifteen year loan. The flexibility of paying a lot in a good streak and the safety a smaller payment otherwise is more practical for many people.
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November 5, 2007 at 1:21 PM #96032
NotCranky
Participant“Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.”
That is great if you are in a position to find a house that you, and better half if applicable, will accept and can qualify for it on a fifteen year loan. The flexibility of paying a lot in a good streak and the safety a smaller payment otherwise is more practical for many people.
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November 5, 2007 at 1:21 PM #96038
NotCranky
Participant“Just take out a 15 year loan. Lower rates, and truly pay it off in half the time, with a ~35% higher monthly payment.”
That is great if you are in a position to find a house that you, and better half if applicable, will accept and can qualify for it on a fifteen year loan. The flexibility of paying a lot in a good streak and the safety a smaller payment otherwise is more practical for many people.
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November 5, 2007 at 12:58 PM #96017
Raybyrnes
Participantpatientlywaiting
“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”
That’s not necessarily true. It increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
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November 5, 2007 at 12:58 PM #96022
Raybyrnes
Participantpatientlywaiting
“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”
That’s not necessarily true. It increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
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November 5, 2007 at 12:58 PM #96031
Raybyrnes
Participantpatientlywaiting
“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”
That’s not necessarily true. It increase the amount you are applying to the principal on the following payment threrefore reducing the outstanding principal balance. So there is a 1 pay lag time.
-
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November 5, 2007 at 9:20 AM #95903
patientlywaiting
ParticipantIn 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.
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November 5, 2007 at 9:20 AM #95912
patientlywaiting
ParticipantIn 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.
-
November 5, 2007 at 9:20 AM #95919
patientlywaiting
ParticipantIn 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.
-
-
November 5, 2007 at 7:49 AM #95844
NotCranky
Participant“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.
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November 5, 2007 at 7:49 AM #95853
NotCranky
Participant“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.
-
November 5, 2007 at 7:49 AM #95859
NotCranky
Participant“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.
-
November 5, 2007 at 10:16 AM #95901
Daniel
ParticipantNo 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?
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November 5, 2007 at 10:49 AM #95916
DCRogers
ParticipantYou can do a lot a pre-payment experiments yourself online, with calculators such as http://www.bankrate.com/brm/mortgage-calculator.asp. (I used $100K, 6%, 30yr fixed).
So, how much does paying half of each payment half a month early speed things up? Let’s simplify: make a full extra payment at the start; this is the same as paying all of each payment a full month early. How much time does this take off the loan? About 5 months — not bad for a single payment, but not a multi-year miracle, either.
Adding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you’re looking to pay off early, such a habit is the way to go. Keep it simple, don’t look for miracles in software or complicated schemes.
(Just keeping track of twice the number of payments over 30 years would drive me nuts, and would make the 5-month savings not worth it to me!)
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November 5, 2007 at 10:49 AM #95977
DCRogers
ParticipantYou can do a lot a pre-payment experiments yourself online, with calculators such as http://www.bankrate.com/brm/mortgage-calculator.asp. (I used $100K, 6%, 30yr fixed).
So, how much does paying half of each payment half a month early speed things up? Let’s simplify: make a full extra payment at the start; this is the same as paying all of each payment a full month early. How much time does this take off the loan? About 5 months — not bad for a single payment, but not a multi-year miracle, either.
Adding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you’re looking to pay off early, such a habit is the way to go. Keep it simple, don’t look for miracles in software or complicated schemes.
(Just keeping track of twice the number of payments over 30 years would drive me nuts, and would make the 5-month savings not worth it to me!)
-
November 5, 2007 at 10:49 AM #95982
DCRogers
ParticipantYou can do a lot a pre-payment experiments yourself online, with calculators such as http://www.bankrate.com/brm/mortgage-calculator.asp. (I used $100K, 6%, 30yr fixed).
So, how much does paying half of each payment half a month early speed things up? Let’s simplify: make a full extra payment at the start; this is the same as paying all of each payment a full month early. How much time does this take off the loan? About 5 months — not bad for a single payment, but not a multi-year miracle, either.
Adding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you’re looking to pay off early, such a habit is the way to go. Keep it simple, don’t look for miracles in software or complicated schemes.
(Just keeping track of twice the number of payments over 30 years would drive me nuts, and would make the 5-month savings not worth it to me!)
-
November 5, 2007 at 10:49 AM #95993
DCRogers
ParticipantYou can do a lot a pre-payment experiments yourself online, with calculators such as http://www.bankrate.com/brm/mortgage-calculator.asp. (I used $100K, 6%, 30yr fixed).
So, how much does paying half of each payment half a month early speed things up? Let’s simplify: make a full extra payment at the start; this is the same as paying all of each payment a full month early. How much time does this take off the loan? About 5 months — not bad for a single payment, but not a multi-year miracle, either.
Adding 10% extra to each payment shaves off about 6 years; 20% shaves off 10 years. If you’re looking to pay off early, such a habit is the way to go. Keep it simple, don’t look for miracles in software or complicated schemes.
(Just keeping track of twice the number of payments over 30 years would drive me nuts, and would make the 5-month savings not worth it to me!)
-
-
November 5, 2007 at 10:16 AM #95961
Daniel
ParticipantNo 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?
-
November 5, 2007 at 10:16 AM #95967
Daniel
ParticipantNo 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?
-
November 5, 2007 at 10:16 AM #95974
Daniel
ParticipantNo 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?
-
November 6, 2007 at 12:05 AM #96146
Coronita
ParticipantActually, if you read the fine print, you realize that the advertisements say something like Bi-Monthly, but the fine print says bi-weekly.
Bi-Monthly: 2 payments exactly everything month.
Bi-Weekly: 1 payment every two weeks.
The two aren't equal.
There's a difference between bi-monthly mortgage versus bi-weekly mortgage. Bi-monthly doesn't save you jack on the mortgage. Bi-weekly, means your making extra payments . You get the same effect roughly by making 1 extra mortgage payment applied completely to principle each year, spread out over 12 months.
Been, there investigated that. At least BofA are pretty upfront and honest about it if you ask. If my wife and I could have skinned a mortgage another way, we would have already done it.
I just wonder if I get the principle down to really low say in 5 years, could I restructure remaining balance over the remaining term of the 30year loan at the same interest rate. I doubt it, but haven't tried asking.
-
November 6, 2007 at 1:38 AM #96154
Ash Housewares
ParticipantI think this works if and only if the interest on your mortgage is compounded daily.
It’s the miracle of compound interest. The more frequent the period of compounding, the greater the debt (or investment) becomes.
Splitting your payment into smaller, more frequent chunks is the same concept. You are mowing down that daily compounding interest more frequently so it can’t feed off itself as much. So, you end up paying less interest.
I don’t think this would work on a monthly compounding loan.
Edit:
Here’s a good link- paying bimonthly gets you free and clear one month sooner:
http://mortgage-x.com/library/bimonthly.htm
Of course this doesn’t consider the opportunity cost of paying early. -
November 6, 2007 at 1:38 AM #96217
Ash Housewares
ParticipantI think this works if and only if the interest on your mortgage is compounded daily.
It’s the miracle of compound interest. The more frequent the period of compounding, the greater the debt (or investment) becomes.
Splitting your payment into smaller, more frequent chunks is the same concept. You are mowing down that daily compounding interest more frequently so it can’t feed off itself as much. So, you end up paying less interest.
I don’t think this would work on a monthly compounding loan.
Edit:
Here’s a good link- paying bimonthly gets you free and clear one month sooner:
http://mortgage-x.com/library/bimonthly.htm
Of course this doesn’t consider the opportunity cost of paying early. -
November 6, 2007 at 1:38 AM #96224
Ash Housewares
ParticipantI think this works if and only if the interest on your mortgage is compounded daily.
It’s the miracle of compound interest. The more frequent the period of compounding, the greater the debt (or investment) becomes.
Splitting your payment into smaller, more frequent chunks is the same concept. You are mowing down that daily compounding interest more frequently so it can’t feed off itself as much. So, you end up paying less interest.
I don’t think this would work on a monthly compounding loan.
Edit:
Here’s a good link- paying bimonthly gets you free and clear one month sooner:
http://mortgage-x.com/library/bimonthly.htm
Of course this doesn’t consider the opportunity cost of paying early. -
November 6, 2007 at 1:38 AM #96231
Ash Housewares
ParticipantI think this works if and only if the interest on your mortgage is compounded daily.
It’s the miracle of compound interest. The more frequent the period of compounding, the greater the debt (or investment) becomes.
Splitting your payment into smaller, more frequent chunks is the same concept. You are mowing down that daily compounding interest more frequently so it can’t feed off itself as much. So, you end up paying less interest.
I don’t think this would work on a monthly compounding loan.
Edit:
Here’s a good link- paying bimonthly gets you free and clear one month sooner:
http://mortgage-x.com/library/bimonthly.htm
Of course this doesn’t consider the opportunity cost of paying early.
-
-
November 6, 2007 at 12:05 AM #96209
Coronita
ParticipantActually, if you read the fine print, you realize that the advertisements say something like Bi-Monthly, but the fine print says bi-weekly.
Bi-Monthly: 2 payments exactly everything month.
Bi-Weekly: 1 payment every two weeks.
The two aren't equal.
There's a difference between bi-monthly mortgage versus bi-weekly mortgage. Bi-monthly doesn't save you jack on the mortgage. Bi-weekly, means your making extra payments . You get the same effect roughly by making 1 extra mortgage payment applied completely to principle each year, spread out over 12 months.
Been, there investigated that. At least BofA are pretty upfront and honest about it if you ask. If my wife and I could have skinned a mortgage another way, we would have already done it.
I just wonder if I get the principle down to really low say in 5 years, could I restructure remaining balance over the remaining term of the 30year loan at the same interest rate. I doubt it, but haven't tried asking.
-
November 6, 2007 at 12:05 AM #96216
Coronita
ParticipantActually, if you read the fine print, you realize that the advertisements say something like Bi-Monthly, but the fine print says bi-weekly.
Bi-Monthly: 2 payments exactly everything month.
Bi-Weekly: 1 payment every two weeks.
The two aren't equal.
There's a difference between bi-monthly mortgage versus bi-weekly mortgage. Bi-monthly doesn't save you jack on the mortgage. Bi-weekly, means your making extra payments . You get the same effect roughly by making 1 extra mortgage payment applied completely to principle each year, spread out over 12 months.
Been, there investigated that. At least BofA are pretty upfront and honest about it if you ask. If my wife and I could have skinned a mortgage another way, we would have already done it.
I just wonder if I get the principle down to really low say in 5 years, could I restructure remaining balance over the remaining term of the 30year loan at the same interest rate. I doubt it, but haven't tried asking.
-
November 6, 2007 at 12:05 AM #96223
Coronita
ParticipantActually, if you read the fine print, you realize that the advertisements say something like Bi-Monthly, but the fine print says bi-weekly.
Bi-Monthly: 2 payments exactly everything month.
Bi-Weekly: 1 payment every two weeks.
The two aren't equal.
There's a difference between bi-monthly mortgage versus bi-weekly mortgage. Bi-monthly doesn't save you jack on the mortgage. Bi-weekly, means your making extra payments . You get the same effect roughly by making 1 extra mortgage payment applied completely to principle each year, spread out over 12 months.
Been, there investigated that. At least BofA are pretty upfront and honest about it if you ask. If my wife and I could have skinned a mortgage another way, we would have already done it.
I just wonder if I get the principle down to really low say in 5 years, could I restructure remaining balance over the remaining term of the 30year loan at the same interest rate. I doubt it, but haven't tried asking.
-
October 7, 2009 at 11:14 AM #465209
as
ParticipantI am sending my mortgage payment twice a month and my mortgage company told me I can finish my payment 5 years earlier. I called them and requested to pay another $600 more every month. They sent me an amortization schedule. The schedule said I can save 110k on interest.
So paying twice a month is probably a better deal. -
October 7, 2009 at 11:14 AM #465395
as
ParticipantI am sending my mortgage payment twice a month and my mortgage company told me I can finish my payment 5 years earlier. I called them and requested to pay another $600 more every month. They sent me an amortization schedule. The schedule said I can save 110k on interest.
So paying twice a month is probably a better deal. -
October 7, 2009 at 11:14 AM #465747
as
ParticipantI am sending my mortgage payment twice a month and my mortgage company told me I can finish my payment 5 years earlier. I called them and requested to pay another $600 more every month. They sent me an amortization schedule. The schedule said I can save 110k on interest.
So paying twice a month is probably a better deal. -
October 7, 2009 at 11:14 AM #465819
as
ParticipantI am sending my mortgage payment twice a month and my mortgage company told me I can finish my payment 5 years earlier. I called them and requested to pay another $600 more every month. They sent me an amortization schedule. The schedule said I can save 110k on interest.
So paying twice a month is probably a better deal. -
October 7, 2009 at 11:14 AM #466030
as
ParticipantI am sending my mortgage payment twice a month and my mortgage company told me I can finish my payment 5 years earlier. I called them and requested to pay another $600 more every month. They sent me an amortization schedule. The schedule said I can save 110k on interest.
So paying twice a month is probably a better deal. -
October 7, 2009 at 1:10 PM #465277
Sandiagon
ParticipantAre you talking about biweekly or twice a month? Biweekly means you pay one month extra payment every year.
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October 7, 2009 at 1:57 PM #465301
temeculaguy
ParticipantIt’s based on the mortgage company, maybe 15 or more years ago I had a mortgage with some small, obscure mortgage company that had my loan and they allowed the 24 payments per year, twice monthly. They gave me credit toward 14 days interest on half the amount, and the proceeds going to principal. At the end of the year, I gave them no extra money, I paid no third company, no fee and no software. It didn’t knock off ten years, but there was time knocked off (the other option was a constantly decreasin payment). They even had a biweekly program with 26 payments, no early payoff but each payment was less than half of the normal monthly, if the mortgage was a grand, then it was 400 or 450 every two weeks, the extra payment was calculated in as was the lessened interest.
But of course, the outcome of this story was that little regional bank/mortgage company that had my loan, the very same loan that I loved, the only loan and banker that I could call with questions and get a person in two rings, was…..you guessed it……bought out by someone else after about a year, it was either b of a or countrywide cause every loan I have somehow never starts with them but always seems to end up in their hands. And of course they refused to honor that deal and had nothing similar available and every time I tried to talk to them it took an hour to get someone that has any clue what their job is. I think the next time I get a home loan I may walk into B of A and just start with them, maybe they will sell my loan to someone else, it may sound crazy but it seems the only way I can get away from them is probably to start with them.
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October 7, 2009 at 8:57 PM #465442
HLS
ParticipantMost would have probably been better off over the last 15 years to have paid down their mortgage with after tax dollars instead of contributing to a 401K.
A variation of this is to max out 401K contributions with pre-tax dollars and then borrow 50% of your account of pre-tax dollars and pay down/off your mortgage. The other 50% remains sheltered.
You are guaranteed a compounded return on pretax dollars equivalent to your mortgage rate.
This strategy is not for everyone due to the danger of job loss and repayment of 401K loan.
There is no guarantee of a compounded return in the market.Mortgage interest is always paid in arrears, never in advance. Unless a program is set up differently, in most cases there is absolutely no advantage to paying your mortgage payment before the 15th of the month. Interest nor principal gets credited faster if you pay on the 1st.
(HELOCS are figured on daily interest, not monthly. The above does not apply)You can only pay off ANY debt faster by paying down extra principal in addition to interest due. There is no other secret formula.
The average person is better off with a 30 YR mortgage than a 15YR. YES, they will pay more dollars over time, but in most cases end up paying back with inflated dollars and virtually everybody has more income over 30 years to service the debt and it is easier for them to pay….Mortgage debt is usually the cheapest debt consumers have and it’s tax deductible for most.
It’s idiotic to accelerate mortgage payments and carry 10%-30% non deductible consumer debt, yet some people actually do this…. HLS
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October 7, 2009 at 8:57 PM #465630
HLS
ParticipantMost would have probably been better off over the last 15 years to have paid down their mortgage with after tax dollars instead of contributing to a 401K.
A variation of this is to max out 401K contributions with pre-tax dollars and then borrow 50% of your account of pre-tax dollars and pay down/off your mortgage. The other 50% remains sheltered.
You are guaranteed a compounded return on pretax dollars equivalent to your mortgage rate.
This strategy is not for everyone due to the danger of job loss and repayment of 401K loan.
There is no guarantee of a compounded return in the market.Mortgage interest is always paid in arrears, never in advance. Unless a program is set up differently, in most cases there is absolutely no advantage to paying your mortgage payment before the 15th of the month. Interest nor principal gets credited faster if you pay on the 1st.
(HELOCS are figured on daily interest, not monthly. The above does not apply)You can only pay off ANY debt faster by paying down extra principal in addition to interest due. There is no other secret formula.
The average person is better off with a 30 YR mortgage than a 15YR. YES, they will pay more dollars over time, but in most cases end up paying back with inflated dollars and virtually everybody has more income over 30 years to service the debt and it is easier for them to pay….Mortgage debt is usually the cheapest debt consumers have and it’s tax deductible for most.
It’s idiotic to accelerate mortgage payments and carry 10%-30% non deductible consumer debt, yet some people actually do this…. HLS
-
October 7, 2009 at 8:57 PM #465986
HLS
ParticipantMost would have probably been better off over the last 15 years to have paid down their mortgage with after tax dollars instead of contributing to a 401K.
A variation of this is to max out 401K contributions with pre-tax dollars and then borrow 50% of your account of pre-tax dollars and pay down/off your mortgage. The other 50% remains sheltered.
You are guaranteed a compounded return on pretax dollars equivalent to your mortgage rate.
This strategy is not for everyone due to the danger of job loss and repayment of 401K loan.
There is no guarantee of a compounded return in the market.Mortgage interest is always paid in arrears, never in advance. Unless a program is set up differently, in most cases there is absolutely no advantage to paying your mortgage payment before the 15th of the month. Interest nor principal gets credited faster if you pay on the 1st.
(HELOCS are figured on daily interest, not monthly. The above does not apply)You can only pay off ANY debt faster by paying down extra principal in addition to interest due. There is no other secret formula.
The average person is better off with a 30 YR mortgage than a 15YR. YES, they will pay more dollars over time, but in most cases end up paying back with inflated dollars and virtually everybody has more income over 30 years to service the debt and it is easier for them to pay….Mortgage debt is usually the cheapest debt consumers have and it’s tax deductible for most.
It’s idiotic to accelerate mortgage payments and carry 10%-30% non deductible consumer debt, yet some people actually do this…. HLS
-
October 7, 2009 at 8:57 PM #466057
HLS
ParticipantMost would have probably been better off over the last 15 years to have paid down their mortgage with after tax dollars instead of contributing to a 401K.
A variation of this is to max out 401K contributions with pre-tax dollars and then borrow 50% of your account of pre-tax dollars and pay down/off your mortgage. The other 50% remains sheltered.
You are guaranteed a compounded return on pretax dollars equivalent to your mortgage rate.
This strategy is not for everyone due to the danger of job loss and repayment of 401K loan.
There is no guarantee of a compounded return in the market.Mortgage interest is always paid in arrears, never in advance. Unless a program is set up differently, in most cases there is absolutely no advantage to paying your mortgage payment before the 15th of the month. Interest nor principal gets credited faster if you pay on the 1st.
(HELOCS are figured on daily interest, not monthly. The above does not apply)You can only pay off ANY debt faster by paying down extra principal in addition to interest due. There is no other secret formula.
The average person is better off with a 30 YR mortgage than a 15YR. YES, they will pay more dollars over time, but in most cases end up paying back with inflated dollars and virtually everybody has more income over 30 years to service the debt and it is easier for them to pay….Mortgage debt is usually the cheapest debt consumers have and it’s tax deductible for most.
It’s idiotic to accelerate mortgage payments and carry 10%-30% non deductible consumer debt, yet some people actually do this…. HLS
-
October 7, 2009 at 8:57 PM #466271
HLS
ParticipantMost would have probably been better off over the last 15 years to have paid down their mortgage with after tax dollars instead of contributing to a 401K.
A variation of this is to max out 401K contributions with pre-tax dollars and then borrow 50% of your account of pre-tax dollars and pay down/off your mortgage. The other 50% remains sheltered.
You are guaranteed a compounded return on pretax dollars equivalent to your mortgage rate.
This strategy is not for everyone due to the danger of job loss and repayment of 401K loan.
There is no guarantee of a compounded return in the market.Mortgage interest is always paid in arrears, never in advance. Unless a program is set up differently, in most cases there is absolutely no advantage to paying your mortgage payment before the 15th of the month. Interest nor principal gets credited faster if you pay on the 1st.
(HELOCS are figured on daily interest, not monthly. The above does not apply)You can only pay off ANY debt faster by paying down extra principal in addition to interest due. There is no other secret formula.
The average person is better off with a 30 YR mortgage than a 15YR. YES, they will pay more dollars over time, but in most cases end up paying back with inflated dollars and virtually everybody has more income over 30 years to service the debt and it is easier for them to pay….Mortgage debt is usually the cheapest debt consumers have and it’s tax deductible for most.
It’s idiotic to accelerate mortgage payments and carry 10%-30% non deductible consumer debt, yet some people actually do this…. HLS
-
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October 7, 2009 at 1:57 PM #465489
temeculaguy
ParticipantIt’s based on the mortgage company, maybe 15 or more years ago I had a mortgage with some small, obscure mortgage company that had my loan and they allowed the 24 payments per year, twice monthly. They gave me credit toward 14 days interest on half the amount, and the proceeds going to principal. At the end of the year, I gave them no extra money, I paid no third company, no fee and no software. It didn’t knock off ten years, but there was time knocked off (the other option was a constantly decreasin payment). They even had a biweekly program with 26 payments, no early payoff but each payment was less than half of the normal monthly, if the mortgage was a grand, then it was 400 or 450 every two weeks, the extra payment was calculated in as was the lessened interest.
But of course, the outcome of this story was that little regional bank/mortgage company that had my loan, the very same loan that I loved, the only loan and banker that I could call with questions and get a person in two rings, was…..you guessed it……bought out by someone else after about a year, it was either b of a or countrywide cause every loan I have somehow never starts with them but always seems to end up in their hands. And of course they refused to honor that deal and had nothing similar available and every time I tried to talk to them it took an hour to get someone that has any clue what their job is. I think the next time I get a home loan I may walk into B of A and just start with them, maybe they will sell my loan to someone else, it may sound crazy but it seems the only way I can get away from them is probably to start with them.
-
October 7, 2009 at 1:57 PM #465844
temeculaguy
ParticipantIt’s based on the mortgage company, maybe 15 or more years ago I had a mortgage with some small, obscure mortgage company that had my loan and they allowed the 24 payments per year, twice monthly. They gave me credit toward 14 days interest on half the amount, and the proceeds going to principal. At the end of the year, I gave them no extra money, I paid no third company, no fee and no software. It didn’t knock off ten years, but there was time knocked off (the other option was a constantly decreasin payment). They even had a biweekly program with 26 payments, no early payoff but each payment was less than half of the normal monthly, if the mortgage was a grand, then it was 400 or 450 every two weeks, the extra payment was calculated in as was the lessened interest.
But of course, the outcome of this story was that little regional bank/mortgage company that had my loan, the very same loan that I loved, the only loan and banker that I could call with questions and get a person in two rings, was…..you guessed it……bought out by someone else after about a year, it was either b of a or countrywide cause every loan I have somehow never starts with them but always seems to end up in their hands. And of course they refused to honor that deal and had nothing similar available and every time I tried to talk to them it took an hour to get someone that has any clue what their job is. I think the next time I get a home loan I may walk into B of A and just start with them, maybe they will sell my loan to someone else, it may sound crazy but it seems the only way I can get away from them is probably to start with them.
-
October 7, 2009 at 1:57 PM #465916
temeculaguy
ParticipantIt’s based on the mortgage company, maybe 15 or more years ago I had a mortgage with some small, obscure mortgage company that had my loan and they allowed the 24 payments per year, twice monthly. They gave me credit toward 14 days interest on half the amount, and the proceeds going to principal. At the end of the year, I gave them no extra money, I paid no third company, no fee and no software. It didn’t knock off ten years, but there was time knocked off (the other option was a constantly decreasin payment). They even had a biweekly program with 26 payments, no early payoff but each payment was less than half of the normal monthly, if the mortgage was a grand, then it was 400 or 450 every two weeks, the extra payment was calculated in as was the lessened interest.
But of course, the outcome of this story was that little regional bank/mortgage company that had my loan, the very same loan that I loved, the only loan and banker that I could call with questions and get a person in two rings, was…..you guessed it……bought out by someone else after about a year, it was either b of a or countrywide cause every loan I have somehow never starts with them but always seems to end up in their hands. And of course they refused to honor that deal and had nothing similar available and every time I tried to talk to them it took an hour to get someone that has any clue what their job is. I think the next time I get a home loan I may walk into B of A and just start with them, maybe they will sell my loan to someone else, it may sound crazy but it seems the only way I can get away from them is probably to start with them.
-
October 7, 2009 at 1:57 PM #466126
temeculaguy
ParticipantIt’s based on the mortgage company, maybe 15 or more years ago I had a mortgage with some small, obscure mortgage company that had my loan and they allowed the 24 payments per year, twice monthly. They gave me credit toward 14 days interest on half the amount, and the proceeds going to principal. At the end of the year, I gave them no extra money, I paid no third company, no fee and no software. It didn’t knock off ten years, but there was time knocked off (the other option was a constantly decreasin payment). They even had a biweekly program with 26 payments, no early payoff but each payment was less than half of the normal monthly, if the mortgage was a grand, then it was 400 or 450 every two weeks, the extra payment was calculated in as was the lessened interest.
But of course, the outcome of this story was that little regional bank/mortgage company that had my loan, the very same loan that I loved, the only loan and banker that I could call with questions and get a person in two rings, was…..you guessed it……bought out by someone else after about a year, it was either b of a or countrywide cause every loan I have somehow never starts with them but always seems to end up in their hands. And of course they refused to honor that deal and had nothing similar available and every time I tried to talk to them it took an hour to get someone that has any clue what their job is. I think the next time I get a home loan I may walk into B of A and just start with them, maybe they will sell my loan to someone else, it may sound crazy but it seems the only way I can get away from them is probably to start with them.
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October 7, 2009 at 1:10 PM #465465
Sandiagon
ParticipantAre you talking about biweekly or twice a month? Biweekly means you pay one month extra payment every year.
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October 7, 2009 at 1:10 PM #465818
Sandiagon
ParticipantAre you talking about biweekly or twice a month? Biweekly means you pay one month extra payment every year.
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October 7, 2009 at 1:10 PM #465891
Sandiagon
ParticipantAre you talking about biweekly or twice a month? Biweekly means you pay one month extra payment every year.
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October 7, 2009 at 1:10 PM #466101
Sandiagon
ParticipantAre you talking about biweekly or twice a month? Biweekly means you pay one month extra payment every year.
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