Paying mortgage twice a month..

I was just wondering what I am missing.

My friend told me about the person on the radio talking about saving thousands on your mortgage by paying twice a month instead of once a month.

I looked into it and set it up with boi to do this after a lot of phone calls and letters.

It came out then that the man said he made a mistake and took back everything he said.

I just wonder why he said this.

My mortgage interest rate was 3.1% on 260000 for 25 years, monthly payment of 1230 a month.

Now my payments are 595 twice a month at 3.1% on 260000 for 23 years monthly payment of 1190.

I have knocked 2 years payments of capital and interest of my mortgage and i am paying less than I was just because i rang boi on the back of what that man said.

I am also making up the differerence between the 1190 and the 1230(40 euro) and overpaying my mortgage each month. I am not sure how much time this will knock of my term but over 23 years its bound to help.

In my head I am getting a great deal but as I mentioned am I missing something and why is everybody not doing this.

Thanks in advance for any replys.

I wish I could do it - Ulster Bank refuses to accept payments more regularly than monthly - I'd love to pay fortnightly cos that's how my pension is paid.

Hi Shay

It's discussed in detail in this thread.

I suspect that you are paying every two weeks and not twice a month. So you are simply paying more each year.

Brendan

Eithneangela said:

I wish I could do it - Ulster Bank refuses to accept payments more regularly than monthly - I'd love to pay fortnightly cos that's how my pension is paid.

Click to expand...

If you are on a Standard Variable Rate mortgage then you can make one-off payments against your capital amount owing at any time during your term, which would save you interest over the years. #

Look into that. Its basically the same thing, although instead of paying every 2 weeks you might pay off 2 lump sums during the year after you save up a bit.

Or just pay more every month.

You reduce the term of your mortgage if you pay fortnightly, as it basically means you are making an extra month's payment each year.

That doesn't work if you are paying twice monthly as the extra month's payment doesn't arise then.

This is what gets people confused.

shay23b said:

My mortgage interest rate was 3.1% on 260000 for 25 years, monthly payment of 1230 a month.

Now my payments are 595 twice a month at 3.1% on 260000 for 23 years monthly payment of 1190.

Click to expand...

I simply dont believe that you are paying less per month and your term has reduced. It really doesn't work that way.

As Brendan said, are you sure you are not paying 595 per fortnight, which is an average of 1289 per month ( 595 * 26 / 12)

paying bi-monthly will have a slight benefit over monthly payments in a scenario where interest is accrued daily and capitalised monthly - most mortgages these days. One is paying the capital portion off, on average, 15.5days early and paying that little bit less interest as a result.

Using www.Jeacle.ie one can see the comparisons as per the OP:

Monthly 300k 30yr at 3.10% = 1281.05 per month
Fortnightly 300k 30yr at 3.10% = 640.52 per period, or 1387.79 fortightly and paid off 26yrs 5 months, this being better than the saving outlined by the OP.