Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie
Hi all,
Vanilla are planning an update to the site on April 24th (next Wednesday). It is a major PHP8 update which is expected to boost performance across the site. The site will be down from 7pm and it is expected to take about an hour to complete. We appreciate your patience during the update.
Thanks all.

Reduce Mortgage by Making fortnightly Repayments

2»

Comments

  • #32
    drunkmonkey
    Registered Users Posts: 28,090 ✭✭✭✭drunkmonkey


    It's not going to have the same compounding effect over the life of the mortgage throwing in 1 extra month. The bi weekly will have a lot more effect.
    I also don't buy your not saving on interest, your saving a lot on interest.
    You need to make sure the payment is going straight off the mortgage and not waiting for the second payment to arrive before it's taken off the balance, I think that's called a bi monthly not a biweekly though.


  • #33
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,044 Mod ✭✭✭✭AlmightyCushion


    drunkmonkey wrote: »
    It's not going to have the same compounding effect over the life of the mortgage throwing in 1 extra month. The bi weekly will have a lot more effect.
    I also don't buy your not saving on interest, your saving a lot on interest.
    You need to make sure the payment is going straight off the mortgage and not waiting for the second payment to arrive before it's taken off the balance, I think that's called a bi monthly not a biweekly though.

    If you do one extra monthly payment a year it will have the same effect as paying every 2 weeks. If you pay that extra monthly payment as soon as you have it instead of waiting for the extra payments to come from it, you will save more on interest. The sooner you make an over payment the more you save. Saying that the interest savings will be minimal in this case so it largely doesn't matter.


  • #34
    .......
    Closed Accounts Posts: 9,057 ✭✭✭.......


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

    Just to be clear, I dont make an extra payment, I just have a months "cushion" there in case I need it.

    As it builds up I siphon it off out of that account for other things, but I always leave enough there for a 1 month cushion.


  • #35
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    Just to give idea of how minimal the interest savings are lets say your repayment is 1000 and instead you split that 500/500.

    The saving you make is the interest on that 500 you paid early for 14 days before you would have paid it.

    500*((1+(0.03/365))^14) = 500.57565

    So its 50 cent in interest you save that month, 12 months for 30 years gives 180 euro over the whole mortgage, which really is insignificant.

    I'm pretty sure I have the maths right here but open to correction.


  • #36
    ELM327
    Registered Users Posts: 21,345 ✭✭✭✭ELM327


    cruizer101 wrote: »
    Just to give idea of how minimal the interest savings are lets say your repayment is 1000 and instead you split that 500/500.

    The saving you make is the interest on that 500 you paid early for 14 days before you would have paid it.

    500*((1+(0.03/365))^14) = 500.57565

    So its 50 cent in interest you save that month, 12 months for 30 years gives 180 euro over the whole mortgage, which really is insignificant.

    I'm pretty sure I have the maths right here but open to correction.


    And the additional 1000 p/a? (26* bi weekly payments = 13 monthly payments per year)


  • Advertisement
  • #37
    drunkmonkey
    Registered Users Posts: 28,090 ✭✭✭✭drunkmonkey


    I'll be back to fact check that later. Think you miles off and not taking into account the compounding effect.
    Doubling €1 every day for a month makes you a millionaire, on that basis alone i'd say there's a flaw in your calculations.


  • #38
    DirkVoodoo
    Registered Users Posts: 11,504 ✭✭✭✭DirkVoodoo


    drunkmonkey wrote: »
    I'll be back to fact check that later. Think you miles off and not taking into account the compounding effect.
    Doubling €1 every day for a month makes you a millionaire, on that basis alone i'd say there's a flaw in your calculations.

    Correct. You have to perform any calculations over the life of the loan, not a single instance.

    I'd imagine it's more than 50c anyway!


  • #39
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    ELM327 wrote: »
    And the additional 1000 p/a? (26* bi weekly payments = 13 monthly payments per year)

    Thats been covered already
    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.

    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.

    This is in relation to specifically the interest savings by paying two weeks early, no extra payment made at all, i.e. yearly outgoing the exact same.

    @drunkmonkey:
    I think there is a compounding effect but that it is only going to be: extra interest(0.57565)*((1+(0.03/365))^14)
    But will admit I'm not too sure on that, I did try play around a bit more with it in spreadsheet to get full example but couldn't fully get it working so more than happy for it to be fact checked.


  • #40
    Bandana boy
    Registered Users Posts: 4,325 ✭✭✭Bandana boy


    the effect of paying twice a month instead of once is the exact same as over paying half a month on your first payment and paying monthly
    So on a 1000 a month mortgage you save the interest on 500 for the life of a mortgage.
    Which compounded up assuming 3.5% on a 30 year mortgage is about 900 euro .


  • #41
    GingerLily
    Registered Users Posts: 4,767 ✭✭✭GingerLily


    Bandana boy wrote: »
    the effect of paying twice a month instead of once is the exact same as over paying half a month on your first payment and paying monthly
    So on a 1000 a month mortgage you save the interest on 500 for the life of a mortgage.
    Which compounded up assuming 3.5% on a 30 year mortgage is about 900 euro .

    Exactly, some very off sums being thrown around here!


  • Advertisement
  • #42
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    So I found a loan calculator that can be set to different repayment periods
    https://www.vertex42.com/ExcelTemplates/loan-amortization-schedule.html

    On 300,000 @ 3% over 30 years
    Monthly Repayment: 1264.81 Total Interest: 155,332.92
    Semi Monthly Repayment: 632.16 Total Interest: 155,158.73
    Bi Weekly Repayment: 583.52 Total Interest: 155,142.27


    Note: On the bi weekly the term is still 30 years hence reduced payments, the main saving on this is normally due to overpaying and paying off early which is not present in this case.

    The difference here between Monthly and Semi-Monthly is minimal


  • #43
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    Bandana boy wrote: »
    the effect of paying twice a month instead of once is the exact same as over paying half a month on your first payment and paying monthly
    So on a 1000 a month mortgage you save the interest on 500 for the life of a mortgage.
    Which compounded up assuming 3.5% on a 30 year mortgage is about 900 euro .

    An overpayment goes directly off the principal so you save the interest on that amount over the life of loan.
    In a semi-monthly payment each payment is on interest and principal, so you don't make the same savings.


  • #44
    Bandana boy
    Registered Users Posts: 4,325 ✭✭✭Bandana boy


    cruizer101 wrote: »
    An overpayment goes directly off the principal so you save the interest on that amount over the life of loan.
    In a semi-monthly payment each payment is on interest and principal, so you don't make the same savings.

    got you
    So even smaller than my 900 bills

    I was really proving the 20-40k was nonsense so looking for a max possible savings.


  • #45
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    Bandana boy wrote: »
    got you
    So even smaller than my 900 bills

    I was really proving the 20-40k was nonsense so looking for a max possible savings.

    Yeah, it's not a bad quick guesstimate for upper limit though and is easy enough to understand.
    But yeah 900 over 30 years, 30 quid a year, insignificant enough.


Advertisement