Bi-Weekly Payments

save-a-lot

Lady1981 wrote: »

I think that the advantage of bi-weekly payments is the interest saved over the term of the mortgage. Half of your usual monthy payment will be made two weeks early, cutting down the interest payable. Overpayments can then be made on top (depending on your lender) which means you can save twice! :beer:
Lady xx

I suppose that is the optimum situation I guess.

getmore4less

Bi weekly does nothing special it is the overpayng that does the work.

The effect of paying a bit early is tiny compared to to the extra payment which is what makes it look good

The best thing to do is pay as soon as you have the money so for most people this is monthly because that is how they get paid.

Why only bring 1/2 the payment forward when you can bring forward all of it forward and make it a bit bigger.

Robert_Sterling_3

Rather than Bi Weekly try paying half the monthly amount on the 4th of the month and the other half on the 18th of the month. Change the actual dates to any two of your own choice.

getmore4less

Lady1981 wrote: »

I think that the advantage of bi-weekly payments is the interest saved over the term of the mortgage. Half of your usual monthy payment will be made two weeks early, cutting down the interest payable. Overpayments can then be made on top (depending on your lender) which means you can save twice! :beer:
Lady xx

It is not the paying early that makes the bi-weekly look good it is the overpayment.

Do the numbers £100k 5% payment £600pm

£71,085.40 in interest. you'll pay this loan off in 286 months

Pay the same amount as the normal loan but bi-weekly

£70,850.00 in interest. you'll pay this loan off in 284 months

The most you can save by moving the payments forward is the same as borrowing 1 month less money

£69,730.95 in interest. you'll pay this loan off in 282 months

Bi-weekly has an extra payment of £50pm so increasing your normal monthly payment

£60,155.73 in interest. you'll pay this loan off in 247 months


So savings are £235 from the weekly effect and over £11000 from the extra payment.

eeyorerules

I would agree with getmore4less that the earlier you can make the full payment the better rather than making bi-monthly payments. We have a daily interest mortgage and make the payment on the first banking day of the month so that any interest charged for the remainder of the month is calculated from the balance at the beginning of the month. This suits us as we are monthly paid on the last banking day. I also try to make any overpayment on the same day.