Paying your monthly mortgage payment in two halves twice a month saves money?

rinkydinkpanther

The reason paying bi-weekly (or even four-weekly) rather than monthly can save a bit of interest is that there are only 12 months in a year, but 13 sets of 4 weeks (or 26 lots of two weeks). So in effect, you make one additional "monthly" payment each year as overpayment.

uberrich

getmore4less wrote: »

Pay the money as soon as you get paid(you can't pay sooner) paying later just costs more.

I think the nail has been squarely hit on the head.

getmore4less

3 rules of borrowng

1. Borrow as little as you can.
2. Borrow for the shortest time you can.
3. Borrow at the lowest rate you can.

Sometimes you have to vary a bit and consider other factors to optimise 2 examples.
0% CC. you keep the money in savings and pay the min till the rate finishes
Low mortgage follow on rate might mean a higher initial rate.

fsc123_2

I am from Canada and people can choose to have their mortgages set up as monthly, semi monthly, biweekly or weekly. The option that you had seen is the biweekly payment which means every two weeks you would make 1/2 of a monthly mortgage payment. This allows you to pay 26 half payments a year instead of 12 monthly mortgage payments. You are essentially making "13" monthly payments a year instead of 12. This works great because we get paid biweekly (every two weeks) and your mortgage payments gets taken out right when you get paid. This is not the same as a semi monthly payment which would be paying 1/2 a mortgage payment on the 1st and the 15th of the month since you would make 24 half payments which is the same as 12 monthly payments. Hopefully I've explained it thoroughly.

blueberrypie

cha97michelle wrote: »

I think they are using the idea that if you are paid biweekly and you pay a mortgage payment once a fortnight then over a year you pay off 26 payments (ie 13 months worth) so in effect you are paying an extra month off.

Yes, this is exactly what they are talking about. The first mortgage I ever had was in Canada, and this is exactly what we did - 26 payments over a year rather than 24. If you're paid biweekly (as both my partner and I were), it is very straightforward and effective. If you are paid monthly, it could still save you money over the life of your mortgage, but it would require careful budgeting, as some months would see three mortgage payments - and as has been pointed out, it's unlikely that a UK lender (where biweekly wages are unusual) would agree to this method.