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

[Coronita]

Actually, 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.

[Coronita]

Actually, 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.

[Coronita]

Actually, 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.

[Coronita]

Actually, 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.

[Ash Housewares]

I 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.

[Ash Housewares]

I 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.

[Ash Housewares]

I 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.

[Ash Housewares]

I 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.

[Raybyrnes]

jamsvet
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.

[Raybyrnes]

jamsvet
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.

[Raybyrnes]

jamsvet
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.

[Raybyrnes]

jamsvet
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.

[Coronita]

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.

 

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. 

[Coronita]

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.

 

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. 

[Coronita]

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.

 

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. 

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