Newbie Advice - Weekly Mortgage payments

Jowl

A great line to start - but somebody told a friend that "the best way to save money is to pay your mortgage weekly"

Now I've since done some research and found out this depends on when and how often the interest is calculated etc.

My questions is: My mortage payments are calculated monthly (not sure what date yet) - if I changed to a weekly payment but paying the same overall per month - would I save money/reduce the term ?

Thanks

J

john_s_2

I think I'm right in saying - and would be pleased to be corrected - that if your mortgage is calculated monthly then you should pay as much as can on the day from which the monthly interest is calculated.

So if the interest is calculated from the 2nd of the the month to the 1st of the next, then you would want to pay as much as you can on the 2nd.

In other words, monthly payments. If you paid the same amount every month but comprising of weekly payments then your outstanding balance (on which the interest is charged) will be higher throughout the month until you've made the last weekly payment (than it would have been had you paid it all in one go).

A lot of mortgages have the interest calculated daily. But it still makes sense to pay as much as you can, as soon as you can. So if you're paid monthly, pay as much as you can as soon as practical afterwards. If you're paid weekly, then as much as you can weekly.

I must admit, I didn't think lenders accepted anything other than monthly payments, which would mean for weekly paid people they need to save up their wages until it's time to pay the mortgage.

For those lenders who calculate the interest once a year then you might as well pay on the first day the interest is calculated from (to reduce the balance for as long as possible). And spend the rest of the year saving it up in a high interest savings account. The lender might have other ideas however and insist you pay it to them monthly.

I hope that makes sense. I know what I mean but I don't think I explained it very well.

Jowl

Thanks for the reply. I think I see what you're saying!

I have to admit, everytime I think I've sorted it out in my head, I come up with another way of looking at it.

So by your recking, I need to find our what day the interest is calculated - and pay off a (monthly) amount just before it?

I wonder how much I would actually save in interest this way.

john_s_2

So by your recking, I need to find our what day the interest is calculated - and pay off a (monthly) amount just before it?

Yes, that's pretty much it.

I wonder how much I would actually save in interest this way.

To be honest I don't think there's a huge amount in it. I haven't done the maths but my gut feeling is that it's not worth stressing too much over.

I think I'm right in saying that the most you would be saving yourself is the interest due on one month's payment every year. So if a month's payment is £1000, and it's 5% interest, you could save £50 a year. Or at least, that would be the difference between reducing your balance on the day the interest is calculated compared to reducing it the day after.

I think. He says non committally ;-)

Jowl

Thanks again John.

As our mortgage is half that I guess we won't save all that much. Still, an extra pint a month is better than nothing

UK007BullDog

Just to butt in. The banks will not put up will weekly regular mortgage payments. But you can overpay weekly if you wanted to.

Jowl

UK007BullDog wrote: »

Just to butt in. The banks will not put up will weekly regular mortgage payments. But you can overpay weekly if you wanted to.

Not sure what you mean by this - pay my regular monthly payment....but make additional weekly 'overpayments' ?