Mortgage payments

poindexter

...and the interest.

a girl in college yesterday was telling me about someone who was on the afternoon show last week talking about saving tips. one of the things he said was 'if someone pays 2,3 or 4 payments over the period of a month to their mortgage, rather than the one lump sum payment, that over the course of their mortgage they will save money due to less interest being paid. he also said something about when the bank/mortgage company give a cashback thing, maybe €40, that instead of taking that but telling them to keep it will also save money in the long term.'

now i'm confused about this but thought i'd ask anyway, as any titbits like this could be of help, or is it just wishful thinking???


thanks in advance

Milk & Honey

Interest is calculated on the daily balance of the loan. By making payments more frequently and therefor in advance the balance of the loan is slightly lower for the purpose of calculating interest. In a typical loan mortgage interest is charged every three months. It is calculated as average daily outstanding balance multiplied by the average interest rate multiplied by the number of days in the quarter year. In monthly payments the average balance goes down at the end of each month. If paying fortnightly the average balance goes down each fortnight. In at three month period the balance for three of the fortnightly periods is lower than it would have been in a monthly payment cycle. The lower the average balance the less the amount of interest that is charged.

poindexter

Milk & Honey wrote: »

Interest is calculated on the daily balance of the loan. By making payments more frequently and therefor in advance the balance of the loan is slightly lower for the purpose of calculating interest. In a typical loan mortgage interest is charged every three months. It is calculated as average daily outstanding balance multiplied by the average interest rate multiplied by the number of days in the quarter year. In monthly payments the average balance goes down at the end of each month. If paying fortnightly the average balance goes down each fortnight. In at three month period the balance for three of the fortnightly periods is lower than it would have been in a monthly payment cycle. The lower the average balance the less the amount of interest that is charged.

krypton factor stuff there thanks, i think i got a grip of it.

if the payment is due on a certain date, ie the first of each month, does it still make a difference to the amount of interest being paid if i pay the same amount in every week rather than on selected day(1st of month?) I know you have probably answered that already, i'm just wondering as the due date for paymnet is once a month do they only go by how much is in the account on that specific date?

dlambirl

How is this possible? Are mortgages payments not all direct debit payments taken from yuor bank account once a month?? Will mortgage lenders allow you to change the way your mortgage is paid??

poindexter

dlambirl wrote: »

How is this possible? Are mortgages payments not all direct debit payments taken from yuor bank account once a month?? Will mortgage lenders allow you to change the way your mortgage is paid??

not necesserily. mine would always be upto me to pay it in, not the bank coming taking it at end of month. my reason for asking is that i'm unsure too, all i know is from last week i pay my money into an account for my mortgage once a week. previously it was once a month i'd throw the lump sum in and am now wondering if i save money on interest with paying weekly