Years and £1,000's off Mortgage, no extra cost!

Alion

henrid01 wrote: »

OK some quick numbers from the calculator:

Loan amount: 200k
Interest rate: 7%
Repayment per month: 1,300

To pay it off:

Loan Term: 32 years and 8 months
Total Interest Paid: 308, 984 !!!

Same Figures but Fortnightly:

Loan amount: 200k
Interest rate: 7%
Repayment per fortnight: 650

To pay it off:

Loan Term: 25 years and 3 months
Total Interest Paid: 226, 115 !!!

The difference:

You save 7 years 5 months
And 82,869 in interest!!!!!!!


I’m no mathematician, but that looks good to me, and it works because mortgage interest is usually charged daily and it compounds…. (I think…but really, I don’t care as long as it saves me time and money)……

The rest is up to you folks!!

Dave.

I think it's a great way to overpay your mortgage, but on the maths side:

monthly payment £1300 x 12 months = £15,600
fortnightly payment £650 x 26 fortnights = £16,900

So you're overpaying by £1300 or one month every year as there's more than four weeks in a month

InMyDreams

henrid01 wrote: »

The difference:

You save 7 years 5 months
And 82,869 in interest!!!!!!!

You get very similar figures by (as people have said) simply overpaying by one month's worth, once a year. I say 'similar' because the actual figures will fluctuate depending on when in the year you make this overpayment. The sooner, the better. All you are doing by paying fortnightly is spreading this overpayment out over the year and committing yourself to doing it (in the same way reducing your term commits you to higher payments).

If the interest is calculated daily, then the only thing that can make a difference is the balance on each day. If you make a payments on day 14 then the total balance on the days in the second half of the month will indeed be less, compared to paying the whole month on day 30. I think this is what you are getting at. But what do you do if you are paid monthly? Pay two weeks worth and hold onto the rest in your current account for two weeks? No; you should pay the whole month as soon as you have the funds available, thereby keeping the balance of your mortgage debt as low as possible for as many days as possible. If you have spare money to pay off some more, do it there and then (or as soon as you know you won't need the money for other things); don't wait for two weeks.

I think your plan would have mileage for someone who themselves gets paid fortnightly for exactly the same reason as monthly works best for people paid monthly; you are reducing your mortgage debt as soon as you have the funds to do so.