Splitting payments, anyone doing this? m
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Splitting payments, anyone doing this? m
| Sat, 06-07-2003 - 11:50am |
I've heard from friends that if you make payments on bills that have accumulative interest like vehicle loans and mortgages, that you are able to pay of the interest quicker and cut years off the life of the loan. We did talk to our credit union about this and they agreed to split our house payment bimonthly after our dicharge. Is anyone currently doing this and how is it working for you? I also want to get all of our payments like this on automatic withdrawl so we avoid late payments.
TIA,
Lisa
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I worked in a mortgage department for several years and by paying bi-weekly accelerated payments you will indeed save in interest and take years off the amount to time to pay off your mortgage.
How it works? They take your regular monthly pymt and divide it by half (say 1000.00) so now instead of making one payment of 1000.00 you are making two paymts of 500.00. You save on interest because one, you are making payments quicker (principle is going down faster) and secondly twice a year you will make 3 pymts of 500.00 during a one month period. The the end of 12 months you have acutally made 13 monthly pymts. (an extra 1000.00) This make a big, big difference on a mortgage. Just keep in mind when budgeting that you will make those "extra" pymts.
A loan, is not amortized the same way so the savings are not as huge but again if you pay half of what your monthly payment is everytwo weeks you will pay an extra pymt by the end of a years time.
Hope that clarifys for you. I have always (when I had one) paid my mortgage bi - weekly. I started with a 25 year mortgage and in three years I was able to knock it down to 15 years to payoff. (also due to declining interest rate) but it goes to show that paying for 18 years is going to cost less than 25 years.
Sandra
Lisa
It's a great way to get ahead and pay off your mortgage quickly!
Danni
All my best,
Danni
I've always done biweekly rapid, even with car loans, not only for the extra payment and less interest paid thing, but because I could then budget the payments to be due to come out with preauthorized chequing on my payday. If the first payment due was after my payday I asked them to move it back whatever amount of days to coincide with my paydays. You don't have to take the payment date they give you, you can generally move it backwards (not ahead though).
But, I didn't carry a ton of debt back then, with interest rates as low as they are right now, I'm looking at trying to redo my mortgage with just regular biweekly payments at the new interest rates. My mortgage would be my lowest interest rate credit obligation and I want to put my cash on higher rate debt right now and pay off the unsecured stuff. If you have alot of debt at high interest rates, it's questionable (IMO anyway) whether you should be trying to rapid-pay a low rate mortgage.
Then I'm going to tackle rapidly paying the mortgage once I'm done with my 'stupid' debt.
Lorraine
I never realized that this was saving on finace charges. I will continue to do this.
My question is could I do this with my car payment without a formal arrangement? As long as they recieve the entire payment by the due date, would it matter?
Kathie