Foo - Bi-Weekly Mortgage Payment

I haven't even made my first mortgage payment yet and already I'm being offered a "bi-weekly payment schedule"
According to them a bi-weekly payment schedule would eliminate 6-10 years off of my current mortgage. Is anybody familiar with what this is and used it before? I plan on talking to my bank, Wells Fargo who is also the underwriter and the actual mortgage company. Was just curious if anybody else knew of this and the validity/legality of it.

They offer a bi weekly payment so that the second one can be applied to principal only. If you do this MAKE SURE that you state that the payment is to go to PRINCIPAL ONLY so that they will not just take it as another interest payment. Usually the first amounts that you pay are mainly toward interest.

Most people cannot afford to do this but if you can, it pays the house off faster. My opinion is to never pay off a house payment. Let someone else do it for you.

They offer a bi weekly payment so that the second one can be applied to principal only. If you do this MAKE SURE that you state that the payment is to go to PRINCIPAL ONLY so that they will not just take it as another interest payment. Usually the first amounts that you pay are mainly toward interest.

Most people cannot afford to do this but if you can, it pays the house off faster. My opinion is to never pay off a house payment. Let someone else do it for you.
Hmmmmm
so one has to explicitly state?
I can't believe they could offer this and advertise it as lowering the payments and then not actually lowering the payment. Well I guess thats why I asked. most people i know hadn't heard about it.

They offer a bi weekly payment so that the second one can be applied to principal only. If you do this MAKE SURE that you state that the payment is to go to PRINCIPAL ONLY so that they will not just take it as another interest payment. Usually the first amounts that you pay are mainly toward interest.

Most people cannot afford to do this but if you can, it pays the house off faster. My opinion is to never pay off a house payment. Let someone else do it for you.
Oh and technically I'm not going to really be paying for most of it ;)

It will elimate time off of your mortgage near the end of the term because that is when you are primarily paying principal. By then the interest is paid. Hence lowering the payment TIME.

I say to state that it is principal only so that there is no question on the banks part what you are doing. When they receive payment, they just punch it in as amount paid and it automatically goes toward your next payment due (which is your regular "interest" payment).

Its a great idea. Rather then making 12 payments a year, you make the same as 13 payments, and you can easily cut a few years off your loan.

Use this calculator to figure out how much you would save. It could easily be tens of thousands of dollars. http://www.vlender.com/cgi-bin/calc/biweekly.cgi

If you can afford it, add another $100 on each payment. You quickly learn to live without the extra cash, and your house will be yours 4 - 5 years sooner.

Check your mortgage paper work to make sure there are no pre-payment penalties. As
I understand it, in the bi-weekly system you pay half your regular payment every two
weeks (that is a full mortgage payment every four weeks). Thus 52 weeks/4=13, making
it 13 payments a year instead of 12. Not too onerous, and you do cut a significant
amount off the final total you end up paying.

Actually, it's 26 payments a year. You pay 1/2 of your monthly payments every two weeks instead of the total once a month. The two week early payment of 1/2 the mortgage results in significant interest savings over course of the loan because it's not being compounded for those two weeks. You can save hundreds of thousands of dollars in interest. Even if you don't pay off the entire loan and decide to sell the house early, the lower total interest paid on the loan will mean that the sale price of the house will net you hundreds of thousands in additional profits. Check out this link that calculates the difference in total payments: http://mortgage-x.com/calculators/bi-weekly.asp

Actually, it's 26 payments a year. You pay 1/2 of your monthly payments every two weeks instead of the total once a month. The two week early payment of your 1/2 your mortgage results in significant interest savings over course of the loan because it's not being compounded for those two weeks. You can save hundreds of thousands of dollars in interest. Even if you don't pay off the entire loan and decide to sell the house early, the lower total interest paid on the loan will mean that the sale price of the house will net you hundreds of thousands in additional profits. Check out this link that calculates the difference in total payments: http://mortgage-x.com/calculators/bi-weekly.asp
Right, I meant it's the equivalent of 13 payments a year, in
terms of the money you're actually paying. You probably aren't
going to miss that two weeks of compounded interest in your
bank account, and the savings over time are large.

Exactly! That $1700 sitting in your bank-account for two weeks isn't going to earn you much each month, but paying it two weeks early will save you tonnes in interest on a mortgage. Here's the calculations below on a $500,000 30-year mortgage @ 7% interest. Let's say you were to sell the house after 20-years:

MONTHLY PAYMENTS
$2,000,000 sale price of house
-798,362.40 in payments over 20-years
-265,987.44 balance on loan
-----------------
+935,650.16 profit (+117%)

BI-WEEKLY PAYMENTS
$2,000,000 sale price of house
-798,362.40 in payments over 20-years
-106,534.97 balance on loan
-----------------
+1,095,102.63 profit (+137%)

You've gained an additional $159,452.47 (+20%) in profits by paying out the exact same amount, but bi-weekly instead of monthly. :)

http://i42.photobucket.com/albums/e346/DannoXYZ/Investments/BiweeklyVsMonthlyPayments.gif

Its a great idea. Rather then making 12 payments a year, you make 12.5 payments, and you can easily cut a few years off your loan.

Use this calculator to figure out how much you would save. It could easily be tens of thousands of dollars. http://www.vlender.com/cgi-bin/calc/biweekly.cgi

If you can afford it, add another $100 on each payment. You quickly learn to live without the extra cash, and your house will be yours 4 - 5 years sooner.
Haha that was the same calculator i used last night :D Great minds search alike :D

Check your mortgage paper work to make sure there are no pre-payment penalties. As
I understand it, in the bi-weekly system you pay half your regular payment every two
weeks (that is a full mortgage payment every four weeks). Thus 52 weeks/4=13, making
it 13 payments a year instead of 12. Not too onerous, and you do cut a significant
amount off the final total you end up paying.
Yep - My dad told me about that and so I looked for that in the papers BEFORE i signed them.

Now
here comes my next question which may get answered when I talk to my mortgage and bank but I'll ask just in case since neither really care for me to pay it off early as they would easily lose out on 40-100k in .

This company that is offering it charges a setup fee and a fee every time I make a bi-weekly payment.
Is this very standard?

I haven't even made my first mortgage payment yet and already I'm being offered a "bi-weekly payment schedule"
According to them a bi-weekly payment schedule would eliminate 6-10 years off of my current mortgage. Is anybody familiar with what this is and used it before? I plan on talking to my bank, Wells Fargo who is also the underwriter and the actual mortgage company. Was just curious if anybody else knew of this and the validity/legality of it.


If you pay every four weeks, you end up paying 13 months every year. That 13th payment is applied to the principal and that's what knocks the 6-7 years off the mortgage. What you are being offered is just a variation on that plan. And I'll wager they want to charge you a small monthly fee for the privilege.

Don't bother. Whenever you have the extra dough, just send it in with your mortgage payment but specify that it is to be applied to the principal. You can shorten your mortgage without paying any extra fees. I used to round my mortgage payment up to the nearest round number and have that extra applied to the principal.

My wife and I have downsized our house but we decided to keep making the same size payment. The extra is applied to our principal and we'll pay a 15 yr. mortgage off in 6 years.

If you pay every four weeks, you end up paying 13 months every year. That 13th payment is applied to the principal and that's what knocks the 6-7 years off the mortgage. What you are being offered is just a variation on that plan. And I'll wager they want to charge you a small monthly fee for the privilege.

Don't bother. Whenever you have the extra dough, just send it in with your mortgage payment but specify that it is to be applied to the principal. You can shorten your mortgage without paying any extra fees. I used to round my mortgage payment up to the nearest round number and have that extra applied to the principal.

My wife and I have downsized our house but we decided to keep making the same size payment. The extra is applied to our principal and we'll pay a 15 yr. mortgage off in 6 years.

I don't understand why everybody says "specify that it is applied to the principal"
It should automatically be applied to principal once the interest for the month has been paid since you can only accrue so much interest every month. Why or how would it be applied to anything else?

If you don't specify adding it to the principal or there's no extra box to put the extra for the principal on your payment stub, the bank will just apply it to the total amount of the loan. That means the vast majority of your extra payment will be applied to the interest, not the principal. When they write that loan, they've set your payments to pay both principal and interest that you'll accrue for the entire life of the loan. Each month, your payment pays down a tiny spec of principal, the rest goes to pay interest. The amount applied to the principal slowly increases. For a thirty year loan, you don't start paying more on the principal than interest for many years. Check your amortization table.

Banks are in the buisness of making money. If you don't tell them to put the money to the principal, they may put it against the intrest. Thats 100% pure profit for them. Putting the money to the principal will cost the bank tens of thousands of dollars in the long run. I wouldnt leave it upto the bank to decide where the money should go.

Banks == Money.
Money == Evil. ;)

I don't do the bi-monthly payments. I have my payments pulled from my checking account automaticly and I have it setup to pull an extra 10% on each payment. Theres no reason to take the full 30 years to pay off that debt. You quickly learn to live without the extra cash each month when its all done automaticly.

This company that is offering it charges a setup fee and a fee every time I make a bi-weekly payment.
Is this very standard?

It is "standard" in these schemes, but it's dumb, and you don't have to pay it. You could tell them you don't want to pay it, or you could do the bi-weekly payment yourself, i.e. break your payment in half, send it in every other week, and tell them to put the extra on principal.

FWIW, I'm doing bi-weekly payments on my house. That, combined with a tiny extra amount each payment (just a few percent of the payment) is coming right out of my paycheck, it doesn't even hit my account. I'm going to pay off a 30 year mortgage in about 21.5 years, saving a huge amount of interest. If you're thinking about doing this, do it NOW - don't think about it for a few months. The sooner you start doing this (or any other scheme to pay extra) to more benefit it has.

I'd set it up with a monthly payment.
Then if you want make an extra payment every other month if you'd like, and apply that to the principle.
That way, if for any reason you can't swing the 2nd payment, its no biggie.
If you only make 2 extra payments a year, you can knock off about 17 years of your mortgage.

What are the fees? $100 setup / $3 a payment?

Do the math: $3 * 26 (payments a year) * 23 (years) = $1794 + $100 setup. So it costs you an extra $1900 or so for the life of the loan.

I'd gladly pay $1900 to save $100,000+

Wells Fargo holds our mortgage, and has offered us the same thing over the past year. They are legit, and the program will function exactly as they describe it.

Danno - it's clear you know your stuff, but your example doesn't sound like a real-world example where a lot of us live. Your savings is more than my humble house is worth.

Just as a reference, I had a payment book and when making an extra payment would use the payment slip from the end of the book.

The other thing that saved me money was requesting a five year shorter loan. The lender wanted two percent more in iterest, but I still saved thousands of dollars in interest.

I don't understand why everybody says "specify that it is applied to the principal"
It should automatically be applied to principal once the interest for the month has been paid since you can only accrue so much interest every month. Why or how would it be applied to anything else?It has to do with how the interest compounding is calculated on a daily basis on those two weeks out of the month that you're paying early. It's those 13 extra payments per year you do 2-weeks early that adds up. Take that amount you're paying early and accrue interest for 15-years and you'll see that's close to the difference.


Danno - it's clear you know your stuff, but your example doesn't sound like a real-world example where a lot of us live. Your savings is more than my humble house is worth.The numbers are irrelevant really, it's the principle that counts. :) This bi-weekly scheme works for anything. You can run through that calculator for a $250k house or $100k.

What I didn't do was take that 8-years of payments that you didn't make to the bank at the end and put it into other investments. On average, stock-market gives you 2x return of real-estate, so taking those 8-years of mortgage paymetns at the end and putting it into the market will give you an even bigger wad of cash after 30-years compared to just selling the house in 20-years. And both of those scenarios would be much more profitable than paying monthly for 30-years. :)

The banks really know the business of making money; unfortunately, they're on the other side of the table from you so they're not gonna help you figure out how to make money at their expense.... :(

Wells Fargo holds our mortgage, and has offered us the same thing over the past year. They are legit, and the program will function exactly as they describe it.

Danno - it's clear you know your stuff, but your example doesn't sound like a real-world example where a lot of us live. Your savings is more than my humble house is worth.
Mwuahahah I just enrolled. I had to eat an extra first payment
*does happy dance*

What I didn't do was take that 8-years of payments that you didn't make to the bank at the end and put it into other investments. On average, stock-market gives you 2x return of real-estate, so taking those 8-years of mortgage paymetns at the end and putting it into the market will give you an even bigger wad of cash after 30-years compared to just selling the house in 20-years. And both of those scenarios would be much more profitable than paying monthly for 30-years. :)

What stock markets are you investing in? I've not seen anything in the stock market that has convinced me to invest. As it stands i'd rather take 20-40k and throw it in ING at 4.25% before investing. Although if i had an extra 20-40k I'd go buy a 2nd house and let my bro and his wife rent it out ;) .

Just as a reference, I had a payment book and when making an extra payment would use the payment slip from the end of the book.

The other thing that saved me money was requesting a five year shorter loan. The lender wanted two percent more in iterest, but I still saved thousands of dollars in interest.
You know what - IO don't quite get that.
See my dad told me to get a 20-year loan but I didn't understand why.

And here's why.
Okay you pay x amount of dollars a month extra for a 20 year loan and in your case you paid 2% MORE interest.

Heres what I did. I got a 30 year loan and right now, I think the way that it is setup I will pay it off in 20 years due to the combined effort of an extra 83 bucks a month extra and the bi-weekly. According to estimations just the bi-weekly shaves 5 years off. and an extra 60 bucks on top of bi-weekly pays it off 10 years earlier.

Now maybe that 2% extra is not equal to the 6.5 that I got - but to my way of thinking - why the heck would you do that if you can pay it off in 10 or 20 or 30 years regardless of what they ask for. If times get problematic later on in life you can drop down to the 30 year payment which unfortunately is like what - 60-80 bucks a month extra - without the increased interest penalty.

Am I missing something?

Now maybe that 2% extra is not equal to the 6.5 that I got - but to my way of thinking - why the heck would you do that if you can pay it off in 10 or 20 or 30 years regardless of what they ask for. If times get problematic later on in life you can drop down to the 30 year payment which unfortunately is like what - 60-80 bucks a month extra - without the increased interest penalty.

Am I missing something?I think you did it best. It's kinda like negotiating for a car and not telling them that you're gonna pay cash. You wheel & deal and they're getting you rock-bottom pricing because they're planning on making extra on the financing. Then you pay cash for it and spend the least amount possible! So you end up getting a lower 30-year rate, but you'll only be paying it for 21 years. http://i42.photobucket.com/albums/e346/DannoXYZ/GraemlinsSmilies/beerchug.gif


What stock markets are you investing in? I've not seen anything in the stock market that has convinced me to invest. As it stands i'd rather take 20-40k and throw it in ING at 4.25% before investing. Although if i had an extra 20-40k I'd go buy a 2nd house and let my bro and his wife rent it out ;) .
You do both, put cash aside @ money-market rates AND put some money into the stocks. Get into some mutual-funds and let the guys slaving away full-time manage it for you. Also, manage some stocks yourself, after 10-years of practice, you can out-perform the majority of the funds out there. Average-age of fund-manager is now 28 and they weren't in the market in '87. As a result, they got clobbered in 2000 http://i42.photobucket.com/albums/e346/DannoXYZ/GraemlinsSmilies/Graemlin-tongue.gif. Put a little away in stock-options and a tiny amount in futures. You'll be well-diversified at that point.

As for the stock-markets itself, I like the NASDAQ simply for its higher-returns. But that's if I'm investing in the entire market, like an index-fund or index-future. It's picking out the single individual stocks that'll make you the big-bucks. You can find these using O'Neil's CAN-SLIM method as outlined in his book: How to Make Money in Stocks (http://www.amazon.com/How-Make-Money-Stocks-Winning/dp/0071373616/sr=8-1/qid=1158605990/ref=pd_bbs_1/102-6876997-0104111?ie=UTF8&s=books). Combine this with more technical indicators taught in Weinstein's Profiting in Bull & Bear Markets (http://www.amazon.com/Weinstein-Secrets-Profiting-Bear-Markets/dp/1556236832/sr=1-1/qid=1158606064/ref=pd_bbs_1/102-6876997-0104111?ie=UTF8&s=books), and you'll be able to outperform 90-95% of all the fund-managers out there; easily out do 99.9% of everyone out there actually. :)

One of the very first secrets is being flexible, knowing when to get out and quickly. Learn to shift gears and the neutral position of cash is safest IMHO. For example, you could get into REITs and they did great from '99-01 (http://i42.photobucket.com/albums/e346/DannoXYZ/Investments/REITvsNASDAQ-10yr.jpg). But then they tanked, you're better off moving your money elsewhere like the NASDAQ. One way of shifting gears means going from buy-low/sell-high into the opposite tactic of sell-high/buy-low shorting. The real-estate stocks tanking (http://i42.photobucket.com/albums/e346/DannoXYZ/Investments/HousingStocks060828.gif) have been getting me 25-50% in shorts this year. It drops 20%, I make 40%, it drops 30%, I make 60%.

Like jschen mentioned in some other thread, you really only want 25-40% of your net-worth in your house, this keeps enough cash free to put into other much more profitable investments. Luck, is really recognizing the opportunities that life gives you AND having the ability to capitalize on it... heh, heh...

BTW - in that bi-weekly vs. monthly comparison on the last page, I didn't add in the $200,000 or so of maintenance, taxes and insurance on owning a property for 20-years, that'll reduce the profit as well.

I think you did it best. It's kinda like negotiating for a car and not telling them that you're gonna pay cash. You wheel & deal and they're getting you rock-bottom pricing because they're planning on making extra on the financing. Then you pay cash for it and spend the least amount possible! So you end up getting a lower 30-year rate, but you'll only be paying it for 21 years. http://i42.photobucket.com/albums/e346/DannoXYZ/GraemlinsSmilies/beerchug.gif

Well I'm glad i'm not the only one that seees it that way.


You do both, put cash aside @ money-market rates AND put some money into the stocks. Get into some mutual-funds and let the guys slaving away full-time manage it for you. Also, manage some stocks yourself, after 10-years of practice, you can out-perform the majority of the funds out there. Average-age of fund-manager is now 28 and they weren't in the market in '87. As a result, they got clobbered in 2000 http://i42.photobucket.com/albums/e346/DannoXYZ/GraemlinsSmilies/Graemlin-tongue.gif. Put a little away in stock-options and a tiny amount in futures. You'll be well-diversified at that point.
I guess that's one of those things where its alot easier to say how easy it is when one has worked with it for as long as you have. Kind of like me and developing websites or databases or software/applications.


As for the stock-markets itself, I like the NASDAQ simply for its higher-returns. But that's if I'm investing in the entire market, like an index-fund or index-future. It's picking out the single individual stocks that'll make you the big-bucks. You can find these using O'Neil's CAN-SLIM method as outlined in his book: How to Make Money in Stocks (http://www.amazon.com/How-Make-Money-Stocks-Winning/dp/0071373616/sr=8-1/qid=1158605990/ref=pd_bbs_1/102-6876997-0104111?ie=UTF8&s=books). Combine this with more technical indicators taught in Weinstein's Profiting in Bull & Bear Markets (http://www.amazon.com/Weinstein-Secrets-Profiting-Bear-Markets/dp/1556236832/sr=1-1/qid=1158606064/ref=pd_bbs_1/102-6876997-0104111?ie=UTF8&s=books), and you'll be able to outperform 90-95% of all the fund-managers out there; easily out do 99.9% of everyone out there actually. :)

I'll have to see if I can find time to get and read those books.


BTW - in that bi-weekly vs. monthly comparison on the last page, I didn't add in the $200,000 or so of maintenance, taxes and insurance on owning a property for 20-years, that'll reduce the profit as well.
Yeah. If it werent for taxes and insurance i'd be able to make an extra 400 a month payments easily.

You know what - IO don't quite get that.
See my dad told me to get a 20-year loan but I didn't understand why.

Well I was only 23 at the time and without great credit. So I thought that reducing the amount paid in interest at that time was good for me. The fact that I had a payment book should give you a hint about how long ago it was. There was no Internet to research and make oneself educated. Buying a house at that age with a child on the way was an accomplish on its own. My house payments were lower than rent at the time also.

Do you have a 15 yr mortgage? If not, than this is WAY smarter than paying bi-monthly payments.

Hmmm, aren't we comparing just paying off the same loan monthly or bi-weekly? Sure 15-yr will result in less total interest paid, but the rate will be higher as well as monthly payments. Roughly 50% higher. But even in this case, paying off the 15-yr load bi-weekly instead of monthly will STILL end up being better.

I am talking about total cost at the end of the loan, and yes bi-weekly on a 15 year will be faster, then again, why not just pay cash up front? :D Oh yeah, and also i think 15 yr rates are LOWER, not higher.

Do you have a 15 yr mortgage? If not, than this is WAY smarter than paying bi-monthly payments.
No, it'snot - as boith nme and edp denonstrated.
edp got a 2% extra interest rate because he wanted a 20 year loan.
If he would have gotten a 30 year loan at 2% less interst and paid an extra 60-120 bucks a month then it would have been reduced down to a 20 year mortgage WITHOUYT the EXTRA INTEREST

The same can be done to turn that 30 year loan into a 15 year loan. The beauty about getting a 30 year loan is you should be able to weasel the interest rate down and if **** hits the fan you can go back to your lower payments for a while.,

http://www.interest.com/

http://www.bankrate.com/brm/rate/mtg_home.asp

Both of those show a 15 yr fixed at a lower rate than 30 yr.

Try this:

http://www.bankrate.com/brm/mortgage-advisers/15-vs-30.asp

Well I was only 23 at the time and without great credit. So I thought that reducing the amount paid in interest at that time was good for me. The fact that I had a payment book should give you a hint about how long ago it was. There was no Internet to research and make oneself educated. Buying a house at that age with a child on the way was an accomplish on its own. My house payments were lower than rent at the time also.
That is true. Alot of this comes natural to me because we've only been discussing this since I was around 10 years old. I was the first of the kids to make a dream that had been discussed for almost a decade a reality. There's always new stuff to learn and there's always stuff you can learn, e.g. the bi-weekly accelerated payment plan butfor the most part everything else is the same.

And oince again I will reiterate I'm not sure why people would bother going for a nmandatory 15-20 year loan. Unless the actual interest rate is "lower" which i would be willing to bet 50-75% of the time its going to be higher or the same because they want to make as much money as possible from interest.

And you can voluntarily turn a 30 year mortgage into a 20 or 15 year mortgage but if **** hits the fan you don't foreclose because you couldnt come up with the extra money., You can simply drop down and recover.

http://www.interest.com/

http://www.bankrate.com/brm/rate/mtg_home.asp

Both of those show a 15 yr fixed at a lower rate than 30 yr.
that small of a difference and riskjing foreclosure -
Well let me put it your way.
It's your home
if **** hits the fan and you get in trouble and you lose your home because of this and trust me i've had **** hit the fan 3 or 4 times in my life so I understand very clearly how you can go from making 5k a month take home after taxes to making zilch or from makiing 1/2 a million a year to making zilch .
So in the end its only you and your family's funeral. :)

The 30 year can be turned into a 15 year easily and an extra 30 bucks a month probably can offset a .03% increase in interest. And thats assuming you actually get the lower interestrate.

that small of a difference and riskjing foreclosure -
Well let me put it your way..

Small difference?

Comparing a 15 yr (7%) to a 30 yr. (7.5%) on 150,000, you pay $134,892 more in interest with the 30 yr.

Small difference?

Comapring a 15 yr (7%) to a 30 yr. (7.5%) on 150,000, you pay $134,892 more in interest with the 30 yr.What part of "making increased payments" don't you understand?
If you have a 200k 30year mortgage that is 1227 bucks a month to payh it off in 30 years at 6.22% interst
and the same 15 year mortgage at 5.94% interest yourpayments are 1700 a month

So - guess what happens if you pay 1700 a month on your 30 year mortgage ?
It automagically becomes a 15 year mortgage . This has got to be why the world has allowed the oil company7 to bamboozle and **** them for half a century or more . Incapable of seeing something as simple as that.

Btw family #1 whohas the 30 year mortgage can suffer a pretty disastrous period of time and has a better chance of recovering from that disaster without losing the home because he can optionally temporarily drop 500 a month in payments back down to the mandatory 1200.
If thatsame disaster hit the other family they couldnt and they would be have massive fees levied against them and an eventual foreclosure.

congratulationsw family #2 may not have a home and both families would have paid approximately the same amount and ended their mortgage at the same time assuming no disaster befell them.

As it stands i'd rather take 20-40k and throw it in ING at 4.25% before investing.

The HSBCDirect.com accounts are at 5.05% right now and if I remember correctly ING only allows $100k (maybe $200k) per account while HSBC will allow $2mil. Also around 4 months ago I found CDs in the 6's


So - guess what happens if you pay 1700 a month on your 30 year mortgage ?
It automagically becomes a 15 year mortgage .

That is somewhat true, it will be about 15.25 years. Test it on an extra payment calculator, it will cut the term down to 15 yrs, but the interest difference between the 6.22 and 5.94 will be a few thousand. I calculated it just before this post and a 15yr started today will pay off Sept 19th in 15 years, while the 30yr would be paid off in December, thats 3 extra months of 1700 compared to the 15yr. The 30 year would benefit you if you were not 100% sure you would have that extra 472 a month.

I worked in the mortgage industry and there are so many different programs and possible scenarios for each person that unless you know the programs all the programs (500+) there is always going to be a better one for your situation. I didn't have two loans that were exactly the same in the entire time I was a broker. Bi-Weekly programs are a good choice for many, you are paying extra without it really effecting you like a 15yr mortgage will. Everything really just depends on your exact scenario, we had a guy who asked for a higher interest rate because it gave him the tax deduction he wanted.

There are also 7yr, 10yr, 20yr, 25yr, 40yr, 50yr fixed loans, some of the 40 yr are 40/40 a number are 40/30 and 50/30. It is also a fact that very very few people pay off their homes. I remember it being somewhere around 1%. In Cali where people have gained outrageous amounts of free equity a option arm is good for a lot of them. Pay 1.5% every month and get the tax deduction of the fully indexed rate of 6%+. Interest is being defered using up money that was free in a house many will not stay in for long so you will still come out on top in most cases.

I was helping a friend get everything straight for their first home and I was actually shocked at how little information they told me they were able to find. Mortages were new to me when I first took the job so I had no prior experience with knowing what was what.

My best recommendation for anyone that is going to deal with their mortgage is find someone you can really trust, a family friend or family member or someone that can tell you what might be best for your situation. Because frankly a lot of consumers no nothing about how things work and they give advice to others and tell banks/brokers what they should be doing. I am not knocking any advice given here, because I didn't read most of it, but I have had clients tell me how wrong I was and needed to find a new job when if they had listened to me they would have saved A LOT of money.

I'm sure most have heard it but a lot of mortgage people are very crooked, they make A LOT of money and many will do just about anything to make more. That doesnt mean avoid brokers because they can help more than banks can sometimes, it just means read all the paperwork and follow my advice of talking with someone who knows the industry, not someone who "knows" the industry.

Some IMPORTANT overlooked factors here: TAXES and INVESTMENTS

Interest is tax deductible.

Current morgage interest rates are low. around 6% or less. Market returns for investing the money instead may be higher. significantly higher over a 30 year time span.

Most people under 30 are far better served by paying the interest, and taking the tax breaks. Then making the max contribution to your IRA or 401k, and investing in growth mutual funds, index funds, or other long term investments.

Your investment will accrue tax free much more over 20-30 years, than the interest savings on your house at 6%. also, your real estate investment will ALSO appreciate over those years, the same as if you own it with cash or with a mortgage.

Normally, everyone shoud avoid debt like the plague. However, current tax laws make it advantagous to carry debt on your home, at least to 80% of value which is where PMI kicks in and costs more. Even then a case can be made for borrowing 95%, investing the extra 15% you borrow, and paying the 6% mortgage plus PMI.

However, in order for this to hold true, you absolutely must make the investments (IRA contributions). Unfortunately, VERY FEW do. We're all too busy buying cars and stereos and starbux latte's.

I know about the interest and I will be looking into that comes tax time although there probably isn't enough to worry about this year I'm guessing since I just got the loan in the end of august? I don't have the money for a 401k right now and If i did have a spare 10k right now I'd invest it into computer hardware for my business as alot of my stuff is 4-8 years out of date

You know what - IO don't quite get that.
See my dad told me to get a 20-year loan but I didn't understand why.

And here's why.
Okay you pay x amount of dollars a month extra for a 20 year loan and in your case you paid 2% MORE interest.

Heres what I did. I got a 30 year loan and right now, I think the way that it is setup I will pay it off in 20 years due to the combined effort of an extra 83 bucks a month extra and the bi-weekly. According to estimations just the bi-weekly shaves 5 years off. and an extra 60 bucks on top of bi-weekly pays it off 10 years earlier.

Now maybe that 2% extra is not equal to the 6.5 that I got - but to my way of thinking - why the heck would you do that if you can pay it off in 10 or 20 or 30 years regardless of what they ask for. If times get problematic later on in life you can drop down to the 30 year payment which unfortunately is like what - 60-80 bucks a month extra - without the increased interest penalty.

Am I missing something?


I looked at doing the same thing but then I managed to get a good rate on a 15 year note anyway, so I went with it. I'm about five years in already, and with no other debts, I should be able to retire the rest of it pretty quickly.

Some IMPORTANT overlooked factors here: TAXES and INVESTMENTS

Interest is tax deductible.



That’s a huge factor. I’m 30 (soon to be 31) and 4 years in on a 30 year fixed locked in around the 5.25% neighborhood (I really should check my statement). I can’t imagine ever mailing in an extra penny to the mortgage, not especially while we’re busy piling money into my wife’s 403b plan and my Keogh, as well as building some more liquid cash reserves. The house is worth what it is worth whether I pay it off or not, so I don’t see the appeal of dumping money into an asset I have virtually no control over. I look at my payment as just another monthly expense that keeps me dry when it rains and warm when it’s cold out. Paying off a low interest, tax deductible debt at the sake of accumulating assets at a time in my life when I have the optimal investment horizon makes zero sense to me.

Plus the bank that owns my place is really cool about letting us live here.