Login


09192013, 01:39 PM  #2 
Brigadier General
645
Rep 3,944
Posts 
Contact your mortgage servicer and they will tell you what to do and set it up for you.
But it should be your current payment divided by two and paid every two weeks. 
Appreciate
0

09192013, 02:31 PM  #3  
is probably out riding.
6517
Rep 2,277
Posts 
Quote:
The premise is that your interest accrues day by day at the beginning of each month or the day after your payment was received. Since that interest is calculated on the principle balance due making payments more frequently reduces the amount of time interest can accrue which results in you paying less interest and more principle. On a 30 year $300k loan at 4.5% you will save about $45k in interest making bimonthly payments over a single monthly payment. Also, if you make 1 additional mortgage payment a year you'll save about the same amount in interest as bimonthly payments.
__________________
"There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice. Charles de Secondat"
Last edited by Mr Tonka; 09192013 at 04:09 PM. 

Appreciate
0

09192013, 02:36 PM  #4  
Has a sh!t load of pew pews
714
Rep 1,852
Posts 
Quote:
And we knocked off 7 years of payments refinancing and going bi... 

Appreciate
0

09192013, 03:28 PM  #5  
Captain
101
Rep 706
Posts 
Quote:
__________________


Appreciate
0

09192013, 04:08 PM  #6  
is probably out riding.
6517
Rep 2,277
Posts 
Quote:
You and your wife went bi?
__________________
"There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice. Charles de Secondat"


Appreciate
0

09192013, 04:18 PM  #7  
Captain
60
Rep 638
Posts 
Quote:
45/300 sounds pleasantly substantial; I mean, that's free $1.5K/yr in asset which you can apply to an additional payment for each year. And this will give him another savings of.... wait... Biweekly = 26 payments of 1/2 of monthly payments, so that's 26 x 1/2 = 13 as opposed to your normal 12. So you are actually paying 1 additional monthly payment out of your pocket per year. So if you're getting the same $45k savings from (a) simply making 1 additional payment, and (b) going biweekly which is effectively making 1 more payment, there seems no interest savings from paying more often. Am I getting this right? That said, how about making exactly 2 payments per month? I don't know if banks commonly allow this type of schedule, but what kind of interest savings will this generate? EDIT: Oops, I must have read your post wrong. Confused biweekly and bimonthly. Well, the dictionary says bisomething is either twice in that period or once every two periods, not to mention my ignorance on this subject. So I'm still curious about my original question. Last edited by will.c; 09192013 at 04:28 PM. 

Appreciate
0

09192013, 11:41 PM  #8  
First Lieutenant
11
Rep 343
Posts
Drives: '08 335i, '03 Kawa Z1000
Join Date: Apr 2013
Location: SW FL

Quote:
Edit: Ran the numbers and although I can't post results properly from my phone essentially you would pay the loan off 5 months sooner, but would only save $270. 

Appreciate
0

09202013, 09:03 AM  #9 
Has a sh!t load of pew pews
714
Rep 1,852
Posts 

Appreciate
0

09202013, 11:42 AM  #10  
is probably out riding.
6517
Rep 2,277
Posts 
Quote:
Consider that on a $50k 60 month car loan you may only pay $5000 to $7000 in interest over that term. With a $300k 360 month home loan you're paying any where from $245k to $300k in interest over that term.
__________________
"There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice. Charles de Secondat"


Appreciate
0

09202013, 01:14 PM  #11 
Private First Class
15
Rep 155
Posts 
I believe Mr. Tonka is an Advisor as well. I'll offer a slightly different perspective in order to supplement what he said (all of which I agree with).
Taking the Dave Ramsey approach of paying off debt as quick as possible is certainly wise for some people. However, it may not necessarily be the best approach in a perfect world if you have financial discipline. On a $300k mortgage with a 30 year 4.5% interest rate you’ll pay about $247k in total interest. However, that’s assuming you keep the mortgage for the entire 30 year period and don’t sell it before then. If you pay BiWeekly you’ll end saving yourself $40,859 in interest over the 30 year period. That sounds pretty good right? However, consider a few things: You’re paying an extra $1520.06 a year when paying bimonthly. Would you rather have that money now and possibly invest it? You’re effectively lowering your interest rate to 3.85% from 4.50% over 30 years but you have to pay it off 4.3 years faster. Is that significant to you? $40,859 in savings sounds pretty good after 30 years, but factoring in 2.5%/year inflation, that’s less than $20k in today’s dollars. If you invested that $1500/year instead, you’d only need to see about a 4.12%/year return over 30 years to break even. Conclusion: It’s great that you’re thinking long term, but you need to decide for yourself if it makes sense to pay bimonthly. Sure, you’re saving yourself money in interest, but rates are so low right now you’re not really saving yourself much money when you break the numbers down. 
Appreciate
0

09202013, 02:41 PM  #12 
Lieutenant Colonel
573
Rep 1,906
Posts 
If you have the cash, paying it off early in a lump might not be a bad idea. Investing is tough now unless you believe there's a lot of upside left in the market.

Appreciate
0

09202013, 02:49 PM  #13 
Private
13
Rep 94
Posts 
Can you clarify this statement? I thought monthly, you pay 2 half payments, so in the end it's the same. How do you pay more with the same payments?
__________________
H&R Sport Springs, Koni Yellow shocks, PE Exhaust, AFE Stage 2 sealed intake. AA tune.

Appreciate
0

09202013, 03:13 PM  #14  
Private First Class
15
Rep 155
Posts 
Quote:
The mortgage payment on a $300k 30 year 4.5% rate mortage is $1520.06 a month. Biweekly payments means you're making 26 payments a year. Presumably at $760.03/payment (half your monthly payment). With a 52 week year you're making 26 half payments. That comes out to 13 monthly payments. 

Appreciate
0

09202013, 03:44 PM  #15  
is probably out riding.
6517
Rep 2,277
Posts 
Quote:
Quote:
You can check out an online mortgage calculator and pop in some variables to see the differences. I'm not an advisor. I just wanted to find out the best way to save as much as we could and pay off the debt as quickly as possible on our first home. After looking at it from all directions we ultimately made 3 mortgage payments a month. We paid our normal payment (principle and interest) and made an additional payment in the middle of the month that was twice as much as the mortgage towards principle. Started doing that in the 3rd year of the loan and paid it off in 10 years. As RandomHero said, that's not always the best thing to do. Our goal was to get that property paid off and producing revenue via a tenant. At the same time, get a credit line using that property as collateral and use the credit line for down payments on new rentals.
__________________
"There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice. Charles de Secondat"


Appreciate
0

09202013, 04:03 PM  #16 
Private
13
Rep 94
Posts 
Got it. I kept thinking this set up was paying half the monthly mortgage on the 1st, then then the other half on the 15th, but biweekely means every two weeks, duh.
__________________
H&R Sport Springs, Koni Yellow shocks, PE Exhaust, AFE Stage 2 sealed intake. AA tune.

Appreciate
0

09202013, 04:19 PM  #17  
Private First Class
15
Rep 155
Posts 
Quote:
To make it easy: $1000 monthly payment (12 a year) no savings $500 bimonthly payment (24 a year) might save you $1000 over 30 years if you're lucky $500 biweekly payment (26 a year) saves you tens of thousands of dollars, but the tradeoff is that you could be investing that extra money. 

Appreciate
0

09202013, 05:22 PM  #18 
Chief Senior Executive Managing VP of Orange Sales
272
Rep 2,245
Posts 
^^
Bimonthly would be once every two months Semimonthly is twice per month Just to clarify. 
Appreciate
0

09202013, 05:32 PM  #19  
is probably out riding.
6517
Rep 2,277
Posts 
Quote:
__________________
"There is no greater tyranny than that which is perpetrated under the shield of the law and in the name of justice. Charles de Secondat"


Appreciate
0

09202013, 07:29 PM  #20 
Has a sh!t load of pew pews
714
Rep 1,852
Posts 
Apparently, according to the dictionary, biweekly and bimonthly can both mean twice a month.

Appreciate
0

09202013, 08:17 PM  #21 
Brigadier General
645
Rep 3,944
Posts 
Biweekly is every two weeks (26payments per year). Bimonthly or semimonthly is twice a month (24 payments per year).
Last edited by gatorfast; 09202013 at 08:38 PM. 
Appreciate
0

09202013, 09:20 PM  #22  
First Lieutenant
11
Rep 343
Posts
Drives: '08 335i, '03 Kawa Z1000
Join Date: Apr 2013
Location: SW FL

Quote:
I prefer using biweekly to refer to once every two weeks and bimonthly for once every two months, but the former can also mean twice per week and the latter twice per month. 

Appreciate
0

Post Reply 
Bookmarks 
Thread Tools  Search this Thread 

