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Posted: 6/27/2024 2:12:50 PM EDT
[#1]
Quote HistoryQuoted: If I had a mortgage at 2.25% I'd drag that fucker out as long as I could. I like free money. This guy gets it. I have a friend who is hell-bent on paying his mortgage off early, and his mortgage is at 2.5%. He could have made 25% in the market the last two years.... |
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Posted: 6/27/2024 2:18:31 PM EDT
[#2]
Its just a method to pay money early. Thats it. The way a loan and interest work, you pay interest on the money you still owe. By paying money early, you owe less money so you pay less interest.
The various strategies for paying half a mortgage payment every 2 weeks or paying an extra payment every year, paying double payments, or just paying some random amount extra every time you pay. They are all just different strategies to pay the principal early. Which one works best for you depends largely on your pay periods. Some people get paid on the same day every week. So for them, it makes more sense to pay half their mortgage every 2 weeks. It syncs the mortgage up with their incoming money. Some people get paid on the 1st, 15th, or some other fixed date. For them, it helps more just paying extra whenever they can or want to. Mathematically, you save more money by paying sooner. But for the sake of budgeting and running your household expenses, it may feel better syncing up your extra payments with your pay schedule. |
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Posted: 6/27/2024 2:19:25 PM EDT
[#3]
Quote HistoryQuoted: Did that a few years back. Got in at 2% and knocked 2 yrs or so off the total duration of the loan. So now instead of a 30yr we got a 28yr. But after what I've read in this thread I think I'm going to start throwing bigger chunks at the principal....so long as there's no reason to make minimum payments. Our home is the ONLY debt we have. I want to get out from under that boot ASAP!!! If I had a 2% mortgage I'd be paying no extra and laughing all the way to the bank even more than I am with mine at 4.25%. |
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Posted: 6/27/2024 2:20:11 PM EDT
[#4]
Quote HistoryQuoted: So long as we can afford it (we easily can).....is there any other thing to consider or why this might be unwise to do when looking at 2% rate, etc.?? Or is this a no-brainer with zero downside? Thanks! With such a low rate and very manageable payment, my mortgage bill wouldnt be my top list to pay off fast, personally. I would look at how are my other outstanding debits and pay those off first; How is my rainy day oh shit fund, do I have at least 3/6/9/12 months I could live on if needed; it a car in need of replacing or an AC/Heater in need of replacing. You also mentioned buying land, you might even be able to fit the payment of the land with what you would have made toward your house principal monthly. |
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Posted: 6/27/2024 2:21:06 PM EDT
[#5]
Quote HistoryQuoted: Another option if you are in a 30yr loan, look to refi at a 15yr loan. We did that back when rates were under 3%. Got a better rate and our payments only went up $200/month. I was never good about making extra payments with the 30yr loan. I always got a 15 year mortgage, payments are 20% more but half the time. Even on my rentals. Paying on anything for 30 years is depressing to me. |
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Posted: 6/27/2024 2:23:32 PM EDT
[#6]
I was paying a crazy amount extra on the mortgage trying to knock it down with a 4% rate. Refi during Covid with 2.2% 15 years and I just pay the minimum. Why lock free money up in a home you don't plan to sell for many years?
I guess a 7% rate up ends all that though. |
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Posted: 6/27/2024 2:24:59 PM EDT
[#7]
Quote HistoryQuoted: With such a low rate and very manageable payment, my mortgage bill wouldnt be my top list to pay off fast, personally. I would look at how are my other outstanding debits and pay those off first; How is my rainy day oh shit fund, do I have at least 3/6/9/12 months I could live on if needed; it a car in need of replacing or an AC/Heater in need of replacing. You also mentioned buying land, you might even be able to fit the payment of the land with what you would have made toward your house principal monthly. So like if I'm paying $1600/mo mortgage....instead of paying an extra $400-$500 toward the principal....see if I can find a decent price on land? I just don't see $400-$500/mo being an adequate or acceptable payment. Not unless the land was super tiny/cheap. Like $10k-$20k cheap. Then, yes, I can see that working. But that cheap I'd rather just pay for it outright than let the vultures fuck me with an 8% rate. |
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Posted: 6/27/2024 2:25:26 PM EDT
[#8]
Quote HistoryQuoted: You have this response saved, don't you?  Quote HistoryQuoted: Quoted: The math on all of this is really interesting from a geek-out perspective, but it always feels like middle class rich guy Cosplay, to me. Poor people never think like this. Stupid rich guys never think like this. It seems to be a uniquely middle class thing - and it's made worse, by middle class dudes who are decidedly not wealthy...but acting as if they are...in a way that actual rich people do not. It's weird. Do what you want (I'm all about it), but this entire conversation just seems like middle class mental masturbation. You have this response saved, don't you?
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Posted: 6/27/2024 2:28:07 PM EDT
[#9]
I make a single monthly payment that includes an additional 2 payments worth of principle.
Anticipate the 30 year loan paid off in 10 years. |
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Posted: 6/27/2024 2:31:37 PM EDT
[#10]
My bank just treats it as an extra principle payment. They still want the full amount on the first of the month regardless.
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Posted: 6/27/2024 2:33:14 PM EDT
[#11]
Quote HistoryQuoted: So like if I'm paying $1600/mo mortgage....instead of paying an extra $400-$500 toward the principal....see if I can find a decent price on land? I just don't see $400-$500/mo being an adequate or acceptable payment. Not unless the land was super tiny/cheap. Like $10k-$20k cheap. Then, yes, I can see that working. But that cheap I'd rather just pay for it outright than let the vultures fuck me with an 8% rate. Instead of paying an extra $400-500 towards principle, put it in the bank. Watch the remaining principle on your mortgage grow at 2% while the money in your bank account grows at 4-5ish%. Profit. Math says do not put anything extra towards mortgage while mortgage interest rate is below savings account interest rate. If the time comes when you want to throw money at principle, you will have more money to throw at it than you will have knocked off by paying early, as long as savings rate is higher than mortgage rate. |
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Posted: 6/27/2024 2:37:09 PM EDT
[#12]
Quote HistoryQuoted: Instead of paying an extra $400-500 towards principle, put it in the bank. Watch the remaining principle on your mortgage grow at 2% while the money in your bank account grows at 4-5ish%. Profit. Math says do not put anything extra towards mortgage while mortgage interest rate is below savings account interest rate. If the time comes when you want to throw money at principle, you will have more money to throw at it than you will have knocked off by paying early, as long as savings rate is higher than mortgage rate. That makes sense. So at the very least if the savings is earning more than the mortgage rate is costing.....keep it in saving vs. higher principal payments. Thanks |
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Posted: 6/27/2024 2:39:38 PM EDT
[#13]
Quote HistoryQuoted: So like if I'm paying $1600/mo mortgage....instead of paying an extra $400-$500 toward the principal....see if I can find a decent price on land? I just don't see $400-$500/mo being an adequate or acceptable payment. Not unless the land was super tiny/cheap. Like $10k-$20k cheap. Then, yes, I can see that working. But that cheap I'd rather just pay for it outright than let the vultures fuck me with an 8% rate. It was more to give you more thought process on what to do with the spare cash you would be putting toward the principal. That might be able to be freed up, add with what other extra you may have monthly, that you might be able to swing a land buy. Of course price of the land, rate, location and taxes are all going to be the unknown factor at this point, but an option none the less. At your rate for your place, I would be looking elsewhere to place the spare cash you would be putting into principal. Also another thing to consider, would/does your house write off at tax time help/hinder. |
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Posted: 6/27/2024 2:39:53 PM EDT
[#14]
Quote HistoryQuoted: Your lender has to support it. I inquired with my mortgage lender, and they did not support it. Any payments you make are totaled at the end of the month, then that month is processed. Paying half your payment mid-month did nothing. It only helps if the lender processes the payment, and reduces your outstanding principal balance immediately upon processing. So, I simply made additional principal payments each month with my normal payment. Semi-monthly payments are making two payments per month, which reduces your term by reducing the principal slightly earlier. This will reduce the amount you pay in interest over the life of the loan. Bi-weekly payments are making a payment every two weeks, or 26 payments per year. This results in lower interest like semi-monthly, AND you are actually making one extra full payment per year towards principal. This results in paying the mortgage off faster than semi-monthly. Either one requires lender support. Not really. It’s based on the terms of your mortgage. A traditional 30 year fixed mortgage will not allow for application of partial payments. Your partial payment will sit in “suspense” until the full monthly amount is remitted. At that point, p&i will be applied and the due date advanced. Making two half payments per month does nothing to reduce interest paid over the term of the loan. Now daily simple interest and equity lines of credit may be different. |
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Posted: 6/27/2024 2:40:35 PM EDT
[#15]
I've done it before but the mortgage holder just held the money and combined it into one payment at the end of the month.
I think the "faster paydown" comes from the yielding two extra biweekly payments a year (just as if you get paid biweekly, there are two months with three pay periods). |
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Posted: 6/27/2024 2:45:08 PM EDT
[#16]
I just make an extra payment on principle every month, I'm on track to have the house paid off in 27' on our mortgage we got in 17'.
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Posted: 6/27/2024 2:46:18 PM EDT
[#17]
Quoted: I've seen it mentioned several times on vids and through reading but I'm curious what the reality is when it comes to making payments every other week (just dividing the monthly payment by 2) vs. making payments once a month. Supposedly it reduces the overall length of the mortgage or maybe cost or both compared to monthly....just didn't know if that was BS or not. For anyone that's done it, please share your experience. Thanks! My mortgage was taken care of between an old job and self employment, so in the months where business was above estimates, I brought more home. Those months allowed the mortgage to be decimated in under 7 years instead of what would have been 12 years had I stayed at the previous employer. |
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Posted: 6/27/2024 2:49:53 PM EDT
[#18]
Don't lock yourself into more payments, or higher payments (a shorter term).
Then, if and when you can, make extra payments (or higher payments) as long as you are assured the extra goes against the principal and is not taken as pre-paid interest. |
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Posted: 6/27/2024 2:49:56 PM EDT
[#19]
Quote HistoryQuoted: I've got a mutual fund that's done nothing but lose money over the past few years. Why use "a few years" when comparing to the length of a mortgage? Just a boring old S&P500 mutual fund, over the past 20 years (not including dividend reinvestments)  Annualized return of investing in the S&P500 (such as an Index based Mutual Fund or ETF): This assumes a lump sum investment at the beginning of the period, and added no more money to your account except reinvested dividends. Data based on EOM June 2024 close. 26.0% - 1 year 19.5% - 2 years 10.0% - 3 years 16.6% - 4 years 15.1% - 5 years 13.7% - 6 years 14.0% - 7 years 14.6% - 8 years 13.0% - 9 years 12.7% - 10 years 13.6% - 11 years 14.5% - 12 years 13.7% - 13 years 14.2% - 14 years 14.6% - 15 years 11.2% - 16 years (as if you went all-in 2007 right before the great recession at the peak of the market) 10.2% - 20 years 7.6% - 24 years (as if you went all-in 1999 right before the dot-bomb) 10.6% - 30 years 11.8% - 40 years |
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Posted: 6/27/2024 2:51:56 PM EDT
[#20]
People with bad credit do it for cars all the time. The bank won’t let them go a full month so they make the payment every two weeks.
They can repo quicker based on missed payments. |
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Posted: 6/27/2024 2:53:38 PM EDT
[#21]
Quote HistoryQuoted: I have a 72-month loan on my truck @4.5% APR. I make bi-weekly payments and am paying like 5% extra on top of that. So instead of paying $732/month, I pay $385/2 weeks. Projected to pay my truck off 6-8 months early by doing that. I over pay on my car loans. I know it isn’t wise but I even do it for my current loan that is 0%. I don’t want to pay any longer than I need to pay. |
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Posted: 6/27/2024 3:25:07 PM EDT
[#22]
Maybe this will help.
30 Year Mortgage Amount: $500,000 Interest Rate: 4.00% 12 Monthly Payments: $2,410.91 ($28,930.92 yearly) Total of Payments: $867,927.60 Total Interest Paid: $367,927.60 Now change that to bi-weekly. 26 bi-weekly payments of $1,112.73 ($28,930.98 yearly) Total of Payments: $851,238.45 Total Interest Paid: $351,238.45 Total Savings: $16,889.17 Total number of payments: 765 (~ 29.42 years so you pay off the mortgage about 6 months early with the same annual payment) Now change the bi-weekly payment to half your monthly payment. 26 bi-weekly payments of $1205.46 ($31,341.96 annually, comes out to 13 monthly payments a year instead of 12) Total of Payments: $798,014.52 Total Interest Paid: $298,014.52 Savings over monthly: $69,913.08 Total Number of Payments: 662 (~ 25.46 years so you payoff the mortgage about 4.5 years early, but you are paying more each year) |
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