Pay Your Mortgage Twice A Month And Save Thousands!

In todays IT

irishtimes.com/newspaper/pri … 31588.html

Priceless!

But in a normal enviroment this would actually be good advice. Is there anything that would stop you paying twice a month though?

I know, why don’t you pay it all off in the first month? You could save a packet! Or pay your mortgage payment at the beginning of the month rather than the end when you get your salary…

since almost everyone gets paid monthly this would just add a level of hassle for most.
additonally it wont benefit those on fixed rates.

the advice should be to pay your mortgage the instant you get paid.
or, if you are planning to overpay, do it sooner rathern than later. or directly to the mortage account instead of saving it then paying it off.
these “troll economics” articles (ie, no explanation of how it works, just “free money, derp”) are misleading.
no point in have 1k in your current account for 3 weeks, just pay it off there and then.
similairy, why pay 500 now and 500 in 2 weeks if you have 1k to spare now.

so, how many actually get paid on the 1st and pay the mortage on the 30th? very few i would imagine.

The real “savings” here are in the fact that 26 fortnightly payments are more than 12 monthly payments, duh. It’s straight up overpayment.

Just get a shorter term mortgage and increase the monthly :wink:

No, he’s talking about paying twice monthly rather than fornightly. He addresses forthnightly payments later in the article.

Ha. I bet the mortgage helpline in EBS and PTSB is getting hundreds of calls this morning.

They must really love this Irish Times journalist right now.

Yeah, especially because he is wrong. 23rd Buchan is right. The savings of ~50k are when you do fortnightly payments of half the monthly amount, making 1 extra payment a year.

Just switching from once a month to twice a month hardly makes much difference at all. Can’t find a mortgage calculator that handles that, but based on back of an envelope calculations, on the example given of 300k over 30 years at 5%, I reckon it to be around 500 quid.
Better in your back pocket perhaps, but the article is totally misleading…

Ya, you’re right. He dosen’t know what he’s talking about. The saving is actually only €339.91 over the entire life of the 30 year mortgage.

Sorry 23rd Buchan, I assumed that he had checked his figures. What a prat.

thats actually surprising to me too. i’d heard this before as a great way to save money on the mortgage.
but as i dont have one i didnt look into the figures too much, really surprised that this has been bandied about so much tbh

No problem.

I mean, if the saving arises because interest is calculated daily, why would he suggest bi-monthly payments to save money?

Why not quad-monthly?

Hell, why not just daily micropayments? Surely daily payments would be the best way to pull one over them? :unamused:

It shows a journalists usual understanding of how numbers work.

That said, alot of public servants now get paid twice a month.
(not sure if it’s bi-weekly or bi-monthly)
I suspect this article is aimed at them.

Oh Dash! Knew it was too good to be true :confused:

Seriously, I know nothing, but surely if it was a workable solution one of our ‘celebrity economists’ would have suggested it before now?

financialplan.about.com/od/realestatemortgages/qt/Bi-Weekly-Mortgage.htm

Actually, we’re paying biweekly on a property in USA! Stated above… the reasons why apparently! :neutral_face:

biweekly = fortnightly = good ; save you loadsamoney

twice monthly = waste of time = bad ; save you feck all money

to make sure you’re getting the full benefit of making fortnightly payments, make sure the fornightly payment is the full monthly payment divided by two, not the annual payment divided by 26

some of the sneaky fecker bankers will adjust your payment down to annual/26 if you go fortnightly which means you’re getting no benefit :slight_smile:

:laughing:

option 1 - 30 year €300k mortgage @5% monthly P&I
option 2 - 30 year €300k mortgage @5% fortnightly P&I

[code]payment total interest term

  1. €1610.46 €279,767.00 30 years
  2. € 804.87 €228,513.00 25 years[/code]so option 2 saves you €50k and 5 years.

IT have updated the article on their website and have now published a correction.

And in general, compound interest at a rate of (1+R) converges rapidly on e^R as you subdivide the compounding periods. Even bazillionths of a second wouldn’t squeeze another 2c out of it. (Could result in some nasty transaction costs though :laughing: ).