Loan Question

[Gunslinger]

OK so I get paid on the 1st and 15th of every month.  If I pay half my payment on the 15th and the other half 15 days later when it's do would I save any money on intrest?

PS I'm talking bout my mortgage.

[Nefarious]

I doubt it.

My home loan is 473 a month, I pay 500 when its due. To pay off interest you have to pay more I assumed.

[Gunslinger]

Originally posted by Nefarious
I doubt it.

My home loan is 473 a month, I pay 500 when its due. To pay off interest you have to pay more I assumed.

The amount itself (to include tax and insurance) is $1200  Each paycheck I transfer $600 to a savings account to get a few pennies of intrest on it and then transfer it to my mortgage account (same bank).  I just wonder if intrest on that $600 for the loan would be worthwhile in those 15 days.

[eagl]

Guns,

Basically the way the lenders do that is they have you get 2 weeks ahead on your payments.  You pay interest ahead of time, so at the beginning of the month you pay a buck or two more against the principle.  It isn't much on a monthly basis and most lenders will even whack you a service charge to pay twice monthly instead of once a month, but if you keep your house for the full length of the loan you will save quite a bit of money.

For what I think is a better way to get ahead on your loan and reduce the amount of interest you pay, just make an additional principle reduction payment every month with your regular payment.  My lender lets me make automatic monthly payments of the normal amount, plus whatever additional principle reduction amount I want.  Right now I'm putting about $300/month extra into the mortgage and over the full term of the loan it will save me about $30k in interest and have me pay off the loan about 6 years early.

It doesn't have to be much, and it doesn't have to be every month, but additional principle reduction payments will have a huge long term effect on your mortgage.  Instead of buying a lower interest rate with points, I took a zero points loan and put the money I would have paid in points against the loan right away.  Just a few months of payment against principle put me a year or two ahead on the loan...  Not a bad payoff.  Paying the loan off early can make up for not having the best interest rate.

[Eagler]

my mortage company offers some kind of twice a month payment direct withdraw plan which is suppose to save on interest but I am already doing what eagl has described above so I have not looked into it.

[Gunslinger]

That's pretty much what I thought.  So far I've made $2.00 in intrest putting it in a savings account for half the month.  The way it works I allays have half my payment in the account at all times.  

I heard that making a double first payment knocks off an entire years worth of payments in the long term.

[Hawco]

You might want to consider doing a refi and then setting your terms out so you are more comfortable with the arrangement.
The way Mortgage companies are now that shouldn't be an issue.

[WhiteHawk]

I paid off a 80,000 dollar loan in 7 years.  If I would have paid min payments, the total would have been 192,000 at the end of 30 years.  My end total was less than 100,000.  You cannot lose by paying off your house as fast as possbile, especially the first half.  Aquire a amoritization sheet from your lender and find out where your at.  For example, my house payment was 792.  This includes tax and insurance.  the principle at first was about $19  and the interest was $495.  If I add another 20 dollars to that months payment, I just saved $495 in the long run.  If I add another $20 I skip 494, etc.  I put every spare dollar to my house, it is the best investment i made.  There is no penalty for paying off loans fast.  you can write your interest off on your taxes, but it comes no where close to not paying 90% interest to the lender.