Weekly or Monthly mortgage payments?....not obvious if I pay on 1st of month

Ginger_chap

Hi all,

Advice if possible, I've heard you can save a lot by making weekly payments on mortgage instead of monthly. I spoke to my provider and aksed if I can pay weekly......I can.....so good news.

However she noted I pay mortgage on the first of the month, whereas I have until the end of the month to pay the balance. So my thinking is that I pay the full balance at the earliest opportunity (1st of month). As intesrest is calc'd daily, I'm thinking in my instance weekly payments will increase my interest (As I essentially take longere to pay full monthly balance)? 

Can anyone confirm or refute my thinking please. Many Thanks

Mark_d

If your £1000 payment is due on 31 Jan/1 Feb then making four £250 payments during the month of January would mean you pay less interest.  You can't make your weekly payments after the due date, so you wouldn't be increasing the amount of interest.

To minimise mortgage interest you want to be making the payments as soon as you have the money.  I receive my salary by the 28th of each month so I have a standing order for the mortgage on the 28th.

grumbler

Ginger_chap said:

 I've heard you can save a lot by making weekly payments on mortgage instead of monthly. 

For £1000 monthly payments and 5% interest rate you'll be saving about £1.50 p.m. if you split it into 4 equal  payments. Is this 'a lot'?

That's not exactly weekly, but very close. And, I think, in the long term it doesn't matter what day of the month your current payment is on.

ETA: these figures are for the case if you just made £1000 payment and at the same time start paying  ~£250 weekly, essentially making partial advance payments of the next £1000 (or if you make weekly payments from the very start).

If your start paying weekly from the next month (i.e. in a month your payment is £250 instead of £1000 and then £250 weekly), you LOOSE money, not save.

If you are allowed, just make one-off £1000 overpayment and, without switching to weekly payments, you'll be saving more than £4 p.m. for the rest of your mortgage term.

dunstonh

Advice if possible, I've heard you can save a lot by making weekly payments on mortgage instead of monthly. I spoke to my provider and aksed if I can pay weekly......I can.....so good news.

Thats because weekly would see you make 13 payments a year instead of 12.

You wont save a lot but it will save something.  Many would find just overpaying on the monthly would be simpler.

grumbler

dunstonh said:

Advice if possible, I've heard you can save a lot by making weekly payments on mortgage instead of monthly. I spoke to my provider and aksed if I can pay weekly......I can.....so good news.

Thats because weekly would see you make 13 payments a year instead of 12.

How come? And what if the total yearly amount is the same? Yes, this will have some effect, but negligible.

MWT

The debate about weekly or bi-weekly payments mostly comes from the USA where it is a lot more common for people to be paid on those terms as well.

The aim should always be to minimise the time that you have the funds in your current account not earning interest rather than being paid to bring down the mortgage...

So if you are paid weekly then paying the mortgage weekly is a good idea, if you are paid monthly then make sure your payment date is as close as is safe to the date you are paid to get the same effect.

The 13 payments vs 12 is a bit of smoke and mirrors as it means you are just paying more during the 12 month period as you pay more often than a quarter of a month each time and you can achieve the same thing by making an overpayment.

amanda1024

Depends on when you get paid, when the mortgage is due, and the difference between mortgage interest and savings interest. It might be better making the mortgage payment as soon as you’re paid, or putting the money in savings then making the mortgage payment just before the due date. Doesn’t make a massive difference in the grand scheme of things though - I looked at this for mine and it’d be about £22 per year.

grumbler

amanda1024 said:

Depends on when you get paid, when the mortgage is due

...

No, it doesn't - like I said above and can prove if needed.