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Reduce Mortgage by Making fortnightly Repayments

  • 12-06-2019 8:52am
    #1
    Registered Users Posts: 28,041 ✭✭✭✭


    On the first month of our mortgage as first time buyers. Mortgage plus life insurance is around 26% of our combined net income. Quite comfortable with that amount for now. Hoping to factor in an overpayment once things settle down which will probably bring things up to close to 30%.

    If you can handle paying your mortgage every 2 weeks(it's still the same amount per month), it could knock 20/40k off your mortgage just on interest savings.
    There was a thread on it a few weeks ago surprised it didn't get more traction as it's a good way to save a lot on your mortgage without having to overpay.


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Comments

  • Registered Users Posts: 2,414 ✭✭✭ILikeBoats


    If you can handle paying your mortgage every 2 weeks(it's still the same amount per month), it could knock 20/40k off your mortgage just on interest savings.
    There was a thread on it a few weeks ago surprised it didn't get more traction as it's a good way to save a lot on your mortgage without having to overpay.

    Really?
    Do all banks allow this?


  • Closed Accounts Posts: 9,057 ✭✭✭.......


    ILikeBoats wrote: »
    Really?
    Do all banks allow this?

    No they dont all allow it.


  • Registered Users Posts: 21,224 ✭✭✭✭ELM327


    ILikeBoats wrote: »
    Really?
    Do all banks allow this?
    Check the terms of your loan


    usually its only for those on variable


  • Registered Users Posts: 28,041 ✭✭✭✭drunkmonkey


    ILikeBoats wrote: »
    Really?
    Do all banks allow this?

    Yea some do it's called a bi weekly payments. Interest is added daily to a mortgage so your saving straight away, really starts to have a compounding effect after a few years. Let's say your on a 300k.morgtage at 3.5% for 30 years, roughly it would knock 3 or 4 years off your mortgage without having to overpay. It'll save you maybe 100k in gross earnings.


  • Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Mod Note

    Thread split.


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  • Registered Users Posts: 1,016 ✭✭✭JJJackal


    ILikeBoats wrote: »
    Really?
    Do all banks allow this?

    It makes a difference over the life time of the mortgage - unless you have a substantial mortgage at a pretty high interest I am not sure the difference will be massive


  • Registered Users Posts: 28,041 ✭✭✭✭drunkmonkey


    JJJackal wrote: »
    It makes a difference over the life time of the mortgage - unless you have a substantial mortgage at a pretty high interest I am not sure the difference will be massive

    It's about 7.5k saving per 100k going on 3% interest over 30yrs
    Interest rate at 4.5% moves it to 14.5k per 100k over 30yrs.


  • Registered Users Posts: 3,205 ✭✭✭cruizer101


    If you can handle paying your mortgage every 2 weeks(it's still the same amount per month),

    But its not the same amount per month because you pay half your monthly payment every two weeks so you make the equivalent of 13 standard monthly payments a year, that is why the saving are so significant.

    It is definitely a good idea for people who get paid that way. But if you are getting paid monthly I personally think it is easier to just overpay every month to get the same savings but still keeeping income and outgoings on the same schedule.


  • Registered Users Posts: 446 ✭✭ec_pc


    cruizer101 wrote: »
    But its not the same amount per month because you pay half your monthly payment every two weeks so you make the equivalent of 13 standard monthly payments a year, that is why the saving are so significant.

    Not neccessarily true in my case with AIB. Moved from monthly to fortnightly and AIB took the 12 monthly payments and spread them over the 26 fortnightly payments so in effect I was not making the equivalent of 13 monthly payments over the course of a year. Am on variable rate so have benefit of top ups which is a great way of eating into the mortgage if you can afford to.


  • Registered Users Posts: 14,232 ✭✭✭✭SteelyDanJalapeno


    Why not just pay daily if this is the case


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  • Registered Users Posts: 1,016 ✭✭✭JJJackal


    Why not just pay daily if this is the case

    Most people receive their salary payment every 2 weeks or monthly rather than daily. If you got paid daily into your bank account and were allowed to pay your mortgage of daily it would result in a huge saving


  • Administrators Posts: 53,127 Admin ✭✭✭✭✭awec


    Banks would never allow you to pay it daily due to the overhead of having to process daily payments.


  • Moderators, Entertainment Moderators, Politics Moderators Posts: 14,460 Mod ✭✭✭✭johnnyskeleton


    Why not just pay daily if this is the case

    The primary benefit is that 12 monthly payments of 1,000 is 12,000, but 26 biweekly payments of 500 is 13,000. Basically some months have 5 weeks so you are in effect overpaying your mortgage by a grand each year.

    There is a small interest saving, but this is relatively modest. Youd probably save the same paying the 1k upfront at the start of the year.


  • Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,032 Mod ✭✭✭✭AlmightyCushion


    The primary benefit is that 12 monthly payments of 1,000 is 12,000, but 26 biweekly payments of 500 is 13,000. Basically some months have 5 weeks so you are in effect overpaying your mortgage by a grand each year.

    There is a small interest saving, but this is relatively modest. Youd probably save the same paying the 1k upfront at the start of the year.

    If you over pay 1k at the beginning of the year instead of split over the year then you would save more as you will be avoiding some extra interest on the 1k.


  • Registered Users Posts: 14,232 ✭✭✭✭SteelyDanJalapeno


    The primary benefit is that 12 monthly payments of 1,000 is 12,000, but 26 biweekly payments of 500 is 13,000. Basically some months have 5 weeks so you are in effect overpaying your mortgage by a grand each year.

    There is a small interest saving, but this is relatively modest. Youd probably save the same paying the 1k upfront at the start of the year.

    I thought the benefit was less time owed over the space of a month so interest is reduced


  • Registered Users Posts: 4,767 ✭✭✭GingerLily


    The primary benefit is that 12 monthly payments of 1,000 is 12,000, but 26 biweekly payments of 500 is 13,000. Basically some months have 5 weeks so you are in effect overpaying your mortgage by a grand each year.

    There is a small interest saving, but this is relatively modest. Youd probably save the same paying the 1k upfront at the start of the year.

    I thought the benefit was less time owed over the space of a month so interest is reduced

    No, the interest element alone is negligible really, the benefit is that you pay an extra month's payment a year, so you save money that way naturally


  • Registered Users Posts: 143 ✭✭BillyBird


    awec wrote: »
    Banks would never allow you to pay it daily due to the overhead of having to process daily payments.

    Bank of Ireland (I'd say all the banks are the same) allows you make lump sum payments online against a mortgage. Weekly, daily, whenever you want.

    So yes, the banks certainly allow it.


  • Administrators Posts: 53,127 Admin ✭✭✭✭✭awec


    BillyBird wrote: »
    Bank of Ireland (I'd say all the banks are the same) allows you make lump sum payments online against a mortgage. Weekly, daily, whenever you want.

    So yes, the banks certainly allow it.

    Bank of Ireland will set you up a direct debit to be taken daily in place of the monthly one?

    We aren't talking about manual overpayments here. Of course if you're allowed to overpay you can login and do so manually as often as you like.


  • Registered Users Posts: 21,224 ✭✭✭✭ELM327


    awec wrote: »
    Bank of Ireland will set you up a direct debit to be taken daily in place of the monthly one?

    We aren't talking about manual overpayments here. Of course if you're allowed to overpay you can login and do so manually as often as you like.
    You can set this up from your account online.


  • Administrators Posts: 53,127 Admin ✭✭✭✭✭awec


    ELM327 wrote: »
    You can set this up from your account online.

    A daily direct debit / standing order?

    Direct debits are setup by the requestor of the money, which would be the bank. You would need to ask them to do it for you, and ask them to take it every day.

    Standing orders, I would be surprised if BoI allow you set one up for daily frequency. I just checked both AIB and Ulster Bank, and both of them have Weekly as the most frequent option available.


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  • Registered Users Posts: 143 ✭✭BillyBird


    awec wrote: »
    We aren't talking about manual overpayments here. Of course if you're allowed to overpay you can login and do so manually as often as you like.

    The OP was just taking about advantages of paying more frequently, not sure where direct debits came into it, you don't need a direct debit to pay more frequently.


  • Administrators Posts: 53,127 Admin ✭✭✭✭✭awec


    BillyBird wrote: »
    The OP was just taking about advantages of paying more frequently, not sure where direct debits came into it, you don't need a direct debit to pay more frequently.
    The thread is about changing the frequency of paying your mortgage.

    Not how often you can pay extra on top of your monthly payment. Of course you can login to your bank account everyday and manually transfer into your mortgage account, so long as overpaying is allowed, if this is all you want.


  • Registered Users Posts: 21,224 ✭✭✭✭ELM327


    awec wrote: »
    A daily direct debit / standing order?

    Direct debits are setup by the requestor of the money, which would be the bank. You would need to ask them to do it for you, and ask them to take it every day.

    Standing orders, I would be surprised if BoI allow you set one up for daily frequency. I just checked both AIB and Ulster Bank, and both of them have Weekly as the most frequent option available.
    You can set up multiple standing orders.
    If you set up 7 (5) standing orders you can pay monday-friday every week


  • Closed Accounts Posts: 2,738 ✭✭✭Heres Johnny


    This saving is achieved by paying 8.3% more each year if your fortnightly payments are halved every fortnight

    1000 a month is 12000 a year
    500 fortnightly is 13000 a year

    13000/12000 is 1.083

    You are paying it faster and that's the main benefit not the reduced interest payment.


  • Registered Users Posts: 14,643 ✭✭✭✭loyatemu


    I pay my mortgage on the 1st day of the month (get paid on the last Fri of the month). I don't see how splitting this into 2 payments would reduce the interest - surely just moving your payment to as soon as possible after you get paid has the same effect.


  • Closed Accounts Posts: 9,057 ✭✭✭.......


    loyatemu wrote: »
    I pay my mortgage on the 1st day of the month (get paid on the last Fri of the month). I don't see how splitting this into 2 payments would reduce the interest - surely just moving your payment to as soon as possible after you get paid has the same effect.

    It takes advantage of the extra days in every month.

    Most months are 4 weeks plus 2 or 3 days.

    So if you pay on the 1st of every month, 1000 euro, you pay off 12000 in one year.

    If you pay every 2 weeks, 500 euro, you pay off 13000 in one year.


  • Registered Users Posts: 14,325 ✭✭✭✭jimmycrackcorm


    ....... wrote: »
    It takes advantage of the extra days in every month.

    Most months are 4 weeks plus 2 or 3 days.

    So if you pay on the 1st of every month, 1000 euro, you pay off 12000 in one year.

    If you pay every 2 weeks, 500 euro, you pay off 13000 in one year.

    Which is fine if you get paid fortnightly, however if you get paid monthly then you will end up making three payments of 1500 out of a paycheck more than once


  • Closed Accounts Posts: 9,057 ✭✭✭.......


    Which is fine if you get paid fortnightly, however if you get paid monthly then you will end up making three payments of 1500 out of a paycheck more than once

    It wouldnt suit everyone.

    I get paid monthly but I have a month "spare" in the account the mortgage is paid from. So when I get paid there is enough to pay it twice. The month spare has built up because I always round up the amount I deposit into that account to cover mortgage and insurance premiums.

    So it might suit me.


  • Registered Users Posts: 14,643 ✭✭✭✭loyatemu


    ....... wrote: »
    It wouldnt suit everyone.

    I get paid monthly but I have a month "spare" in the account the mortgage is paid from. So when I get paid there is enough to pay it twice. The month spare has built up because I always round up the amount I deposit into that account to cover mortgage and insurance premiums.

    So it might suit me.

    then you're basically just making an extra payment each year from money that would otherwise be savings.


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  • Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,032 Mod ✭✭✭✭AlmightyCushion


    ....... wrote: »
    It wouldnt suit everyone.

    I get paid monthly but I have a month "spare" in the account the mortgage is paid from. So when I get paid there is enough to pay it twice. The month spare has built up because I always round up the amount I deposit into that account to cover mortgage and insurance premiums.

    So it might suit me.

    In that case you would be better just paying the month spare as soon as possible. The sooner you make the overpayment the more interest you save.


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