Mortgages: Weekly payments

Doo_Lally

Hi All,

I couldn't seem to see any other posts on this, so please point me in the right direction if necessary.

A friend of mine has recently had her finances reviewed by an debt advice organisation, she was advised that she would reduce her costs and the length of her mortgage by making her mortgage payments on a weekly basis. I understand the thought process behind this, but is there a catch.. are there other things to consider?

She was advised that she would have to ask to speak to a manager at her mortgage companies call centre in order to change the frequency of her payments, but they should accept. If this it true, why isn't everyone doing this?

Any help most appreciated and be kind if I am missing something obvious,

Lal

Joe_Bloggs

Name the debt advice organization if you can. I doubt that many lenders are set up to receive weekly payments but in principle it should be possible.
J_B.

Radiantsoul

I can't see a problem, but it is worth checking how mortgage calculate the interest. I suspect it is not that common to pay weekly as most people are paid monthly and it sort of makes sense for the mortgage to come out as the largest payment early in the month. Also up to quite recently mortgage didn't calculate interest rates on a daily(or even monthly) basis.

_bankrupted

I'd say get a different debt adviser.

Here are the repayment figures for a 100k loan over 25 years @5%

Monthly payment = £584.59
Weekly payment = £134.80 = (£584.12 monthly)

So a saving of 47 pence!

blueberrypie

I used to work for an organisation which paid salaries fortnightly. For simple budgeting, I arranged to pay my mortgage fortnightly too - but I arranged that each of those payments would be half of what a monthly payment would have been.

The effect of this (as well as simplifying my budget) was that I effectively made 13 monthly payments per year - an easy way to overpay a mortgage.

I wonder if that's the kind of thing the OP's friend's advisor meant - that she could pay, for example, 1/4 of the monthly payment every week. The result would be the same as it was in my case - an extra monthly payment each year, so reducing the term and overall cost of the mortgage.

(Of course it's only good advice if the OP's friend has no other debts at higher interest rates than her mortgage.)

_bankrupted

blueberrypie wrote: »

I wonder if that's the kind of thing the OP's friend's advisor meant - that she could pay, for example, 1/4 of the monthly payment every week. The result would be the same as it was in my case - an extra monthly payment each year, so reducing the term and overall cost of the mortgage.

No, I am sure he didn't mean that.

The OP friend is trying to reduce costs, she/he is obviously struggling otherwise she/he would not have sought debt advise.

Your method of payment means her monthly mortgage cost is now 1.08 times higher, because 13 payments are being made througout the year not 12. (But yes overall the total mortgage cost will be reduced just as if you walked in to the bank on Monday and slapped the entire balance on the desk as one payment)