Pay mortgage fortnighthly instead of monthly?

D

delgirl

Registered User
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This was posted on the rollercoaster.ie site:

"This is a money saver, but you won't actually see the benefits just yet. Get in touch with your Bank / Building Society and arrange for your mortgage to be taken out fortnightly (or weekly) rather than monthly. Our mortgage was close to 500 a month and now we pay roughly 250 a fortnight. This obviously amounts to the same, but the interest you pay is less and it takes years off your mortgage. It's worth a phone call, they should be able to calculate how many years you will reduce your mortgage by."

Does anyone know if this is true?
 
Re: Posted as a 'Money Saver' on Rollercoaster

Many mortgage companies only allow a monthly payment but I'm sure some do allow additional regular payments ie fortnightly (half monthly if this is what you mean). In effect you are making 26 fortnightly payments instead of 12 monthly payments. So you are paying an additional month off each year.
Make sure that the mortgage company reduce the capital amount with any overpayment and don't keep it as a credit.
 
Re: Posted as a 'Money Saver' on Rollercoaster

asdfg said:
In effect you are making 26 fortnightly payments instead of 12 monthly payments. So you are paying an additional month off each year.
Click to expand...
If the interest is calculated daily, as is the case with NIB (who allow fortnightly payments), you're also saving a little on the total interest bill.
 
Re: Posted as a 'Money Saver' on Rollercoaster


eh, excuse me, but is'nt this simple maths

500*12 = 6000

250 * 26 = 6500

So it does not "obviously amount to the same". it is 500 extra per year, or 41 extra p/month

But, if your lender allows it, it is probably a good idea to accelerate your payments, to allow for earlier mortgage redemption.

On the above figures, assuming a mortgage of €88k over 20 years at 3.3%, the extra payments would mean cutting 2 years off the mortgage term (18 years instead of 20), netting a saving of 3600 in Interest Payments.
 
Re: Posted as a 'Money Saver' on Rollercoaster

If you have money sitting in your current account,then paying some of it earlier off your mortgage will save you interest.

On the other hand, if you have an overdraft you will save on your mortgage at 3.5%, but pay far more on your overdraft.
 
Mr. HP is paid weekly so we pay our mortgage weekly. We're with AIB but not all banks allow weekly/fortnightly payments.
 
I wonder if asdfg (or anyone else) would explain what is meant by 'Make sure that the mortgage company reduce the capital amount with any overpayment and don't keep it as a credit.'. We are overpaying by euro100 a month - doesn't this automatically come off the capital amount?? Thanks.
 
You should put the instructions in writing to the lender that any overpayments are capital repayments. Some lenders, especially if not told explicitly, will simply lodge the additional money to your account as a credit but not reduce the outstanding capital balance thus giving you no benefit. Best to make sure by writing to the lender to make the instructions explicit.
 
We did this last year with ICS Building Society - we will save approx €3,800 interest and cut our mortgage term by 21 months.

Sim
 
Karl Jeacle's mortgage calculator is useful for modelling the effects on effective term and total interest costs of accelerated repayment strategies. I think that his notes include some way of estimating the effects of fortnightly rather than monthly repayments.
 
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