Changing mortage from monthly to bi-weekly?

Fingers Mcginty

Howdy folks. Presently the Mrs and I are paying our mortagage monthly. I get paid fortnightly so It would be easier to manage I think if the mortagage came out on the same day I was paid every two weeks. We are on a Standard Variable rate mortagage. Ideally I'd like to pay a bit more every fortnight and try to decrease the term. Is this possible and what would be the advantages/disadvantages of doing so?

foxirl

Not sure what your exact figures are but just taking an example of a 200,000 mortgage over 30 years at a variable interest rate of 2.8% your monthly payments would be around 822 euro.
If you decide to pay bi-weekly and set your payments to 411 (half of 822) you will be effectively making 13 monthly payments as opposed to 12.
The thing about this is you wouldn't even notice that you are overpaying your mortgage.

The savings on this are massive.

Monthly you would pay back in total 295,920
Biweekly you would pay back in total 283,179
Therfore you would be saving 12,759

Also you will be mortgage free in 26.5 years as opposed to 30

Will need to double check my calculations but I think thats right. If you need any more help just let me know.

eden_my_ass

Before you get excited about the savings...and yes it can be an advantageous way to reduce the mortgage term without feeling like you're paying more, call your bank, many won't do fortnightly payments so may not be even worth thinking about for now.

F1ngers

foxirl wrote: »

Just taking an example of a 200,000 mortgage over 30 years at a variable interest rate of 2.8% your monthly payments would be around 822 euro.
If you decide to pay bi-weekly and set your payments to 411 (half of 822) you will be effectively making 13 monthly payments as opposed to 12.

The savings on this are massive.

Monthly you would pay back in total 295,920
Biweekly you would pay back in total 283,179
Therfore you would be saving 12,759

Will need to check my calculations but I think thats right

foxgirl is spot on, you will get an extra month paid per annum. Plus, if you can put a little more off you could save a good bit more than €13K.

You need to talk to your bank to see if they will accommodate you.

Fingers Mcginty

F1ngers are we related?

foxirl

F1ngers wrote: »

foxgirl is spot on.

Did I just become Female????? Ahhh
FoxIrl

Fingers Mcginty

I have a relatively small mortagage ...80K with about 18 years left. I'm paying back 500 a month at Std Var Rate. If I was to throw in say 300 every fortnight how much could I decrease the term by?

Jo King

Fingers Mcginty wrote: »

I have a relatively small mortagage ...80K with about 18 years left. I'm paying back 500 a month at Std Var Rate. If I was to throw in say 300 every fortnight how much could I decrease the term by?

On a rough calculation the loan should be paid off in less than 13 years, assuming the current interest rate remains in place. 18 years at 500 a month with an outstanding balance of 80K implies an interest rate of 3.5%.

JuliusCaesar

Fingers Mcginty wrote: »

I have a relatively small mortagage ...80K with about 18 years left. I'm paying back 500 a month at Std Var Rate. If I was to throw in say 300 every fortnight how much could I decrease the term by?

300 X 26 fortnights per year = 7,800 / 12 months means your mortgage repayments would be the equivalent of 650 per month.

According to this mortgage calculator, assuming a rate of 3.5%, your mortgage would be paid off in 13 years. JoeKing is right. These mortgage calculators are brilliant. Up your payment to 314 a fortnight and it'd be paid off in 12 years.

Eurorunner

Is there not some saving on interest here also (due to interest being calculated daily?)? Thats the only reason I would bother changing now. If you have the discipline to save the cash and drop it in in large one off payments then its the same difference as regards paying off the capital amount.

BTW, anyone with NIB - I can confirm that they will facilitate a change to weekly or bi-weekly on receipt of a written instruction from the customer.

Jo King

There is an interest saving. Because half of the monthly payment is made in advance by 14 days theres is a saving on 182 days interest on half the monthly payment. Because the full monthly payment is paid early by between one and three days each month there is also a saving of about 28 days interest on the monthly payment. On €800 per month at 3.5% the saving is about €10 per annum. this has to be netted against any deposit interest or offset interest the money might have earned.

ZYX

foxirl wrote: »

Not sure what your exact figures are but just taking an example of a 200,000 mortgage over 30 years at a variable interest rate of 2.8% your monthly payments would be around 822 euro.
If you decide to pay bi-weekly and set your payments to 411 (half of 822) you will be effectively making 13 monthly payments as opposed to 12.
The thing about this is you wouldn't even notice that you are overpaying your mortgage.

The savings on this are massive.

Monthly you would pay back in total 295,920
Biweekly you would pay back in total 283,179
Therfore you would be saving 12,759

Also you will be mortgage free in 26.5 years as opposed to 30

Will need to double check my calculations but I think thats right. If you need any more help just let me know.

Every time this comes up I say the same thing but it would make more sense financially to reduce the payments on your mortgage if you are paying 2.8% interest. A smarter way is to put any extra money into Anglo Irish at 5% (about 4% after DIRT)Thus earning yourself 1.1% extra interest a year You can then take the money out at a later date and use it to pay off some of your mortgage. Also remember to pay off any other loans first before your mortgage ie loans, credit cards, overdrafts

Eurorunner

Jo King wrote: »

There is an interest saving. ....On €800 per month at 3.5% the saving is about €10 per annum. this has to be netted against any deposit interest or offset interest the money might have earned.

OK, I didn't realise it was so little. If thats the case, Its not worth the bother changing.
The additional payments don't interest me - thats something that I intend to do myself via one off payments.