Paying Mortgage Weekly or Monthly?!

T

timaros

Guest
Hi everyone,

We are currently paying our mortgage monthly but I am sure I read somewhere that by actually paying your mortgage weekly it makes more financial sense?

I rang our bank (BOI) and asked if it was possible to pay weekly and she said it was and that there was also the option of paying fortnightly. I asked her was there any benefits to this way i.e. paying off interest quicker or the fact that there are some months with five weeks but she said no that it was just your mortgage amount divided out over the 52 weeks of the year?

Have I got it wrong or does it not make a blind bit of difference what way you pay it unless of course you just pay extra? Sorry if its a bit longwinded!

Thanks in advance
 
I remember someone saying something about that on here a while back. That paying weekly or fortnightly worked out lower on the interest. I asked my bank KBC about it, but they said no, it wouldn't make a difference, so don't know whether it is true or not.
 
You're right, bank official is wrong.

If you pay monthly you make 12 payments per year. If you pay every two weeks you will make 26 half payments each year.

26 half payments = 13 full payments = 13 months

Therefore you are paying back an extra month each year reducing your capital amount and term.

If your bank doesn't facilitate paying every two weeks, you could overpay your mortgage by 1/12 each month for a similar effect.

[broken link removed]
 
Jeacle’s calculator says €100K for 20 years @ 4% with bi weekly payments results in a €5.6K saving in interest and the term reduced by 2 years 3 months.

This calculator simply divides the monthly payment by 2 and applies it 26 times a year, so 13 monthly payments a year instead of 12.

For weekly payments diving by 4 and applying this 52 times a year would be the same, 13 monthly payments instead of 12.

I think you have to specify to your bank that you want to pay half your monthly payment fortnightly, or a quarter of your monthly payment weekly, otherwise the bank simply calculates your payments fortnightly or weekly, which would have some minimal reduction in interest paid but you would not be making an extra payment each year, which is where the real benefit is to be had.
 
My NIB mortgages interest accrues daily and is charged monthly, are most not the same ?
 
Interest is calculated daily on the balance of the loan but only applied at the end of the month. Therefore the interest payment at the end of the month will be 30 or 31 times the daily amount.

If you pay your mortgage weekly then the balance wil drop by a little bit every seven days, therefore the daily interest rate wil also drop by a little bit every seven days. By the end of the month you will pay a few cent less interest than you would have on a monthly pay schedule.

It all adds up over 10, 20 or 30 years.
 
DMcL1971 said:
Interest is calculated daily on the balance of the loan but only applied at the end of the month. Therefore the interest payment at the end of the month will be 30 or 31 times the daily amount.

If you pay your mortgage weekly then the balance wil drop by a little bit every seven days, therefore the daily interest rate wil also drop by a little bit every seven days. By the end of the month you will pay a few cent less interest than you would have on a monthly pay schedule.

It all adds up over 10, 20 or 30 years.
Click to expand...

Makes sense. Seems like you should always go for the weeky option if you have the cashflow.

Anyone able to work the saving for weekly v monthly on say a 30 year, 300K @5% mortgage?
Jeacle's calculator only does monthly from what I could see...

Edit: Just found how you can do a bi-weekly one aswell. Any weekly?
 
Using the PMT formula in excel, €300K @ 5% over 30 years gives the following payments;

360 Monthly payments of €1,610.46 - total paid €579,765.60
Or
1564.3 Weekly payments of €370.38 - total paid €579,385.43

If you simply ask your bank to pay weekly the term will remain the same only the frequency and amount of payments will change, no additional payments will be made. You would save €380.17 over the 30 years or 24.3 cent a week.

You would need to specifically tell them you want to overpay


Using Jeacle’s calculator and then changing the setting to Bi Weekly, the monthly payment is halved and applied 26 times annually resulting in an extra payment each year, this gives an interest saving of €50,900.77 and reduces the term by 4 years, 8 months.

There would be no significant additional saving by paying weekly rather than fortnightly as either way only 1 extra payment is made annually, this is where the benefit is.

This is my understanding, I have no financial training or background so am open to correction.
 
Last edited:
twofor1 said:
Using the PMT formula in excel, €300K @ 5% over 30 years gives the following payments;

360 Monthly payments of €1,610.46 - total paid €579,765.60
Or
1560 Weekly payments of €371.39 - total paid €579,368.40

Click to expand...

The flaw in your calculations is that at there are 1564 weeks in 30 years, not 1560.
30*365/7 = 1564.3

If you simply ask your bank to pay weekly the term will remain the same only the frequency and amount of payments will change, no additional payments will be made. You would save €397.20 over the 30 years or 25 cent a week.

You would need to specifically tell them you want to overpay


Using Jeacle’s calculator and then changing the setting to Bi Weekly, the monthly payment is halved and applied 26 times annually resulting in an extra payment each year, this gives an interest saving of €50,900.77 and reduces the term by 4 years, 8 months.

There would be no significant additional saving by paying weekly rather than fortnightly as either way only 1 extra payment is made annually, this is where the benefit is.

This is my understanding, I have no financial training or background so am open to correction.
Click to expand...

You are talking about paying more, not varying how often you pay.
 
Thanks, you are right, there are 52.14 weeks in a year, so 1,564.3 in 30 years, I have changed my original figures, it only alters things very slightly.

Yes, I am talking about paying more. I think some believe they will make these savings and reduce their term simply by telling their bank they want to pay weekly, this is not the case.
 
You must log in or register to reply here.
Back
Top