Comments on: Guest Post – Biweekly Mortgage Payment

By: MoneyNing

MoneyNing — Wed, 25 Jul 2007 21:39:49 +0000

Carl: It is my understanding that the conventional loans will re-adjust the interest when you pay off extra. How often I believe depends on the Ts and Cs. If your broker is telling you otherwise, you might look into whether your loan has a early payment penalty that some loans have.

Everything should be explained in the “million-page” Ts and Cs document so read that up and see.

By: Carl

Carl — Wed, 25 Jul 2007 19:46:03 +0000

When you pay off additional principal does it really affect how much interest you pay? My understanding is that the loan is fully amortized when you start, so if you put in say an extra thousand, it just means the loan is paid off a little quicker, but you still make the same monthly payment and pay the same amount of interest. Instead of 360 payments maybe you now make 359. Am I wrong about this? My mortgage broker implied I would need to “recast” the loan, with a large fee, to actually reduce the interest I will have to pay. Seems to me it is better to save the money and pay off mortgage all at once.

By: MoneyNing

MoneyNing — Mon, 23 Jul 2007 00:10:22 +0000

vh: Nice to hear that someone can retire comfortably (or pretty close to doing so)!

As I comtemplate my house purchase here in Southern California, I always thought of how I will put a considerable percentage of my income in paying for the mortgage, which then becomes an asset that I cannot really cash because I need to live in it. Even though it’s extremely early at this point, I’m thinking of moving to another city when I retire and then selling my higher priced home to buy a small one, helping my after retirement income from the extra interest.

I think paying off the mortgages is like another way of forced savings which helps most people accumulate more wealth, even though mathematically it does not make sense.

By: vh

vh — Sun, 22 Jul 2007 16:07:45 +0000

While it is best to pay off credit card debts and then, once they’re gone, never ever charge more than you have in your checking account in any given billing cycle, the observation that paying off your mortgage may allow you to retire earlier is true…and then some. When you get to be an old buzzard like me, you make an astonishing discovery:

Extremely nice houses (less work, less upkeep expense, lower taxes, lower insurance) in retirement communities (amazingly lower car insurance!) are to be had for lots less than you can sell your paid-off palace for. Yesterday, after recovering from a monster day of floor scrubbing, kitchen scouring, garage clean-up, bathroom sanitizing, yard maintenance, pool cleaning, and HD-schlepping, I cruised the MLS for smaller, lower-maintenance housing in a nearby retirement community. Lo! For $50,000 to $100,000 less than my house is presently worth, I can buy an exceptionally lovely, fairly new, well designed hovel on a good-sized lot with low-maintenance landscaping in what is now the hottest part of the city. Because developers have recently focussed on the area where those communities were originally built, all the lifestyle amenities we’ve had in the central and east districts have now moved out to the westside, and so Sun City residents are no longer rusticated to the cotton fields.

A $50,000 windfall added to my current retirement savings would allow me to can the job right now, today. Or I could keep the job (albeit with a hideous commute) until I’m 66, let that money continue to compound, and retire with cash flow guaranteed (not “maybe, if inflation never goes crazy again”) to equal my present salary. Hot dang!

Start with the high-interest debts…but for sure, pay down that mortgage as soon as you can!