Weekly mortgage payments UK

Newbie_John

amnblog said:

Newbie_John said:

Please correct me if I'm wrong..

But I really see little benefits of weekly payments.
If we pay monthly £1200 for 30 years at 5% Vs 4 times a month £300 for 30 years at 5%, we literally just save on interests:
3 weeks of £300 (£0.93)
2 weeks of £600 (£1.24)
1 week of £900 (£0.93)
Total monthly saved £3.10, £36 a year, £1080 over the duration of mortgage.

And if you would like to do such saving you can simply pay weekly to an easy-access saving account - then set up a direct debit at the end of the month.

Much better results can be achieved with little overpayments.

Hi John, you have clearly not seen the 'click bait' YouTube videos on weekly payment that are driving these queries promising huge savings.

UK Lenders wont have weekly payments, to reduce your total cost simply pass as much as you can as soon as you can within lenders parameters.

No I haven't watched YouTube, just quickly read one article about it and it had many errors there and quite a lot was taken out of thin air just to make it look credible, for example:

For example a random claim:
"Let's say you have a 30-year mortgage of $400,000 with a fixed interest rate of 5%. Your monthly payment is $2,147.29, but you decide to make biweekly payments of $1,073.64 every two weeks. By doing so, you could trim four years and nine months' worth of payments off your mortgage loan and save $69,448.03 in total interest"

A year has 52 weeks - so paying bi-weekly we make almost an additional month overpayment during that year (12 months x 4 weeks = 48, there are spare 4 weeks there). 
26 bi-weekly payments of 27914.64$ total
vs
12 monthly payments of 25767.48$

During that year we overpay 2147.16$ more, and let's do that 30 times (30 years).. - so you can achieve that in UK within you 10% overpayment allowance each year - no need for confusing weekly payments

MWT

Newbie_John said:

During that year we overpay 2147.16$ more, and let's do that 30 times (30 years).. - so you can achieve that in UK within you 10% overpayment allowance each year - no need for confusing weekly payments

Exactly, there is no magic around weekly payments, it is all about the overpayment, which you can elect to do just as easily on monthly payments...

The popularity comes from the fact that many in the US are paid biweekly, so settling the mortgage payment on the same pattern makes budgeting easier for them.

skandan76

Hi
Paying weekly by rolling instead of monthly payments/4 would make impact on interest savings.
My lender told me to cancel direct debit and  setup up standing order for payments,  on my calculation it will save us atleast few years of interest. If possible you can pay 14 months /52  by weekly would help more to save.

MWT

skandan76 said:

Hi
Paying weekly by rolling instead of monthly payments/4 would make impact on interest savings.

It really only makes sense if you are also receiving your income weekly...

This is where this strategy originates as in the USA it is not uncommon to be paid every two weeks, so aligning your mortgage payments with your pay period and then effectively over-paying because of the 26 pay periods instead of 24 each year is what makes the difference.

No19v87

skandan76 said:

Hi
Paying weekly by rolling instead of monthly payments/4 would make impact on interest savings.
My lender told me to cancel direct debit and  setup up standing order for payments,  on my calculation it will save us atleast few years of interest. If possible you can pay 14 months /52  by weekly would help more to save.

Willing to share this calculation? What you’ll probably find is you’re making an overpayment, which you could just do as a one-off without creating all of these unnecessary work arounds.

MWT

Exactly, the two key elements in this strategy are to overpay, and to minimize the delay between receiving income and paying the mortgage.

If you are paid monthly and pay the mortgage monthly as close as possible to the day you get paid then there is nothing to gain from paying weekly as you are just delaying the subsequent weeks payments.

If you get paid weekly, then and only then does making mortgage payments weekly make sense...

penners324

FtbDreaming said:

I think most mortgage companies want their standard payment monthly. If you were overpaying then that could be done weekly to save a couple of pence interest. I pay my council tax weekly and the computers can’t handle it. Every April I have a fight with them because they send me a fine saying I’ve not paid the monthly payment in time and it’s because the 4th week isn’t hitting their computer in time. So yeah I wouldn’t mess around trying to change to weekly. 

Move to monthly payments then. 

grumpy_codger

No19v87 said:

skandan76 said:

Hi
Paying weekly by rolling instead of monthly payments/4 would make impact on interest savings.
My lender told me to cancel direct debit and  setup up standing order for payments,  on my calculation it will save us atleast few years of interest. If possible you can pay 14 months /52  by weekly would help more to save.

Willing to share this calculation? What you’ll probably find is you’re making an overpayment, which you could just do as a one-off without creating all of these unnecessary work arounds.

Absolutely! The result is about the same as making ONE-OFF overpayment equal to a half of you monthly payment (or moving your monthly payment two weeks forward). No way can this result in "atleast few years of interest".

That said, how is the weekly amount calculated? Is it (monthly)/4 = (monthly)*3/12 or (monthly)*12/52 = (monthly)*3/13? The former is obviously a REGULAR overpaying and the same result can be achieved simply by overpaying monthly.