How many people read their loan contract or even look at it after they sign? Instead they most likely rely on their bank to interpret it to them and rely on their bona fides.
I did expect a bit more from the pin.
I will pay my mortage in full in the first month, and I will save millions.
WTF get a mortgage
"There are very real savings that can be made by paying a mortgage once every fortnight and it is a pity that some Irish banks have decided that they can not facilitate it. "
The guy is an idiot. Even in his retraction article he is still peddling a load of nonsense!
The savings are not because you pay fortnightly, the savings are because you pay more over the course of a year than is expected for your mortgage term.
The exactly same effect can be achieved by simply overpaying on your monthly repayment, or instead of getting a 30 year mortgage, ask for a 25 year one.
I read the retraction. I thought he made that point clearly enough that the reason you’re saving money is because you’re making an extra repayment for the year. I say well done that man for being big enough to stand up and admit that he made a mistake. We don’t see enough of that kind of attitude around these parts.
I think you’re being somewhat unfair. It may well be a lot easier for people to overpay via changing their repayment schedule to fortnightly rather than over paying buy occasionally putting more onthe monthly payment.
I wouldn’t necessarily consider this guy an idiot. And he has the guts to put his hand up.
So why not just say overpay your mortgage by 60 quid a month? 15 euro a week, you’d hardly notice it
You don’t even have to change the term - the bank will just tell you that at current rates of payment you will be finished in x years. It is really satisfying to see that come in (says he who was down to 7 years on a 25 year mortgage after 4 years just by overpaying (by an admittedly chunky amount)).
Why not encourage people not to take on credit? Or not to pay interest if they can help it? But no, consumer champions like to tell people what the cheapest current rates are, not that they should be minimising their interest paying debt or paying it off quickly. (Not directed at Mr. Pope in particular, just at consumer experts, particularly consumer ‘finance’ experts, in general).
edit: or why not lobby, based on Calina’s post, for free ad-hoc payments to the mortgage account? That banks are obliged to let you pay capital off with no cost. We have a debt problem, we don’t have an interest rate problem…
God knows… I’ve never really got to grips with it… it was an ARM product… we could switch through 4 different payment types, including interest only etc… (or we used to be able to)… Husband seemed to think the biweekly was a good idea… and saved us money…
So if I look back on outstanding - it says
Current Payment Explanation
Option 1 : Interest Due 204.18 Principle Paid : 59.58 Total Payment 263.76
Option 2 : Interest Due 204.18 Principle Paid : 104.64 Total Payment 308.82
2/13 Begin Balance : 95004.26
2/21 Misc Appl Pay : 236.76 Principal: -58.77 Interest Paid: 204.99 Interest Rate: 5.61
2/21 Principal Pmt : 45.30 Principal: -45.30
3/7 Misc Appl Pay : 236.76 Principal: -59.36 Interest Paid: 204.40 Interest Rate: 5.60
3/7 Principal pmt : 45.05 Principal: -45.05
3/12 Ending Balance : 94795.79
So After these biweekly payments (02/21 and 03/7) we paid of 208.47 off the Principle - so I assume we’re on Option 2…
Does that look ok?
Ok ok, maybe I was being harsh calling him an idiot.
I guess the biggest problem I have with this is that it’s peddling an impression that there is some sort of black magic voodoo at work here, somehow getting one over “the man”.
I have had 3 friends/colleagues/aquintances forward on the article by email with “FW: FW: FW: OMG Check this out!!!” type subject lines. It leaves me banging my head off my desk.
I’ve seen financial professionals posting it on facebook
even before I ever had a mortgage my mother would tell me that making additional payments would reduce the term; it seems that a generation of people forgot the value of money during the years of El Tigre Celta
Technically, if you pay your mortgage off ahead of schedule and thus reduce your interest burden, there’s an argument in favour of seeing it that way. And if it works, does it matter? The fact is not a lot of mortgage products allow for it.
The point I would make is this: anyone who was sensible about their mortgage borrowing up front will know that it is working because they are overpaying. Some have made provision for that. Those who see it as some sort of black magic are probably people who weren’t as clear on the details as they could perhaps have been up front.
The issue I would have with it is this: most people are paid monthly. It’s a big ask to arrange the biggest outgoing to be fortnightly.
is anyone saying that writing a quarterly cheque to the mortgage account is not being facilitated by the banks (apart from fixed rate mortgages obviously)?
I’ve done it before without any problems and I’m sure now they’re damn glad of it
In order for this to work and maximise your savings, you have to overpay for the entire term, thus reducing it.
Why not just get a shorter term in the first place if you can afford it anyway?! Am I the only one here who can’t see this? AGggghhh.
Well, typically a lot of people couldn’t, and as salaries rose, they could re-finance. This was not unknown in happier times - by which I mean pre-2000 when property wasn’t so much rising faster than incomes. Even with low inflation, people’s salaries may well rise.
It’s worth doing, even if you can’t do it to the maximum. You’re probably not meaning this, but the impression I’m getting from you is if you can’t do it all the time, don’t bother doing it at all. I think that even if you brought down the cost over the life of a mortgage to yourself by a grand or two grand or whatever, it’s still worth considering.
You raise an interesting point but it’s easier to argee to more comfortable conditions and then overpay with the possibility of pulling back without a restructure if things get difficult for you. It’s better to committing to what you can just about manage and having no room to manoeuvre.
In other words, the never never.
I took out a car loan about 18 months ago that was scheduled to run for I think three years. I paid it off in 8 months by overpaying. I knew how extra payments would be applied because I had read my contract. It’s all spelled out in there in black and white.
I’d always go for the longest term possible, with favourable overpayment terms for this reason.
I’ve always overpaid any debt I’ve had anyway, and why not take flexibility at no extra cost.