Multiple home loan payments per month.

[gregmcc]

I've read somewhere here that if you split up your home loan payments and instead of paying one sum in a month, if you pay 2 or 3 you will end up paying your bond off quicker.

Or if you pay extra toward your bond pay it in 2 or 3 installments during the month instead of one.

For the life of me I can't find the post.

Does this really work? How much will you end up saving? Whats the theory behind it?

 

[blunomore]

I think you have to make 100% sure you pay on the correct dates every month. We tried it, but they kept calling us after the first instalment to say we are in arrears, because we did not pay the full monthly amount. It pissed us off so we reverted to a single payment.

 

[supersunbird]

I remember that post, its about paying every 2 weeks, you fit 25 payments in a year instead of 12 (one extra than 24 one would expect)... or something like that...

 

[blunomore]

I remember that post, its about paying every 2 weeks, you fit 25 payments in a year instead of 12 (one extra than 24 one would expect)... or something like that...

You will have to ensure that the last of your 2 (or 3) payments are made before the due date for the full amount, otherwise the bank considers you to be in arrears.

 

[gregmcc]

If you make all the payments though and are not in arrears - does it really help making multiple payment though?

 

[air]

If you make all the payments though and are not in arrears - does it really help making multiple payment though?

I would think that since interest is calculated on a daily basis, multiple payments would reduce the capital amount and thus the interest payable.

 

[noxibox]

I've read somewhere here that if you split up your home loan payments and instead of paying one sum in a month, if you pay 2 or 3 you will end up paying your bond off quicker.

There's no benefit to splitting your normal monthly payment and the bank will rightly consider you to be in arrears if the full amount is not paid on the due. You will pay your loan off much faster if you make payments in addition to the amount due each month. There is no value in splitting the additional payment though. Pay the extra as soon as you can afford to.

 

[Pyro]

If you can make small payments AHEAD of the curve, you could save a small amount of cash, but if you were going to have cash available, why not just pay the whole amount earlier?

This only applies if your interest is calculated daily.

Also remember that you would most likely be paying bank charges. Depending on the loan, this could actually end up costing you more than you'd save.

 

[noxibox]

These will quickly show how it works:
http://www.bretwhissel.net/amortization/amortize.html
http://www.webmath.com/amort.html

 

[blunomore]

The reason why people indicated that it is advantageous to pay more than once a month, is that if you pay every 2 weeks, the end result is that you will end up paying one additional month's bond payment, i.e. 13 full payments per annum, instead of 12.

As I said however, the dates of payment are important.

 

[guest2013-1]

The reason why people indicated that it is advantageous to pay more than once a month, is that if you pay every 2 weeks, the end result is that you will end up paying one additional month's bond payment, i.e. 13 full payments per annum, instead of 12.

As I said however, the dates of payment are important.

No not really a month, might be haven't done the math.

If you pay every 2 weeks instead of once a month the interest you pay off is less than what it would have been for a full month.

Interest is calculated daily, so paying every 2 weeks would reduce the total amount of interest for that month, which means you reduce more on the actual amount lent from the bank than you would have paying normally.

There's a reason why banks don't tell you this when consulting on home loans

 

[marco79]

I remember that post, its about paying every 2 weeks, you fit 25 payments in a year instead of 12 (one extra than 24 one would expect)... or something like that...

Could anyone direct me to this topic please?

 

[gregmcc]

Interest is calculated daily, so paying every 2 weeks would reduce the total amount of interest for that month, which means you reduce more on the actual amount lent from the bank than you would have paying normally.

Think I'll give it a bash. Even if you only end up saving a bit - its still a saving.

These will quickly show how it works:
http://www.bretwhissel.net/amortization/amortize.html
http://www.webmath.com/amort.html

Cool links.