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@Anonymous wrote:
@Lel wrote:
If the payment plan offered is really twice a month, rather than every two weeks, then I can't see how this will lead to any additional interest savings.
It depends on how the interest is calculated. If they take the mid month payment and apply it immediately, then the principle is reduced for the next half month payment. So, you save a relatively small amount of interest (basically half a month's interest on the principle paid by the previous half-months payment). This can still lead to a significant savings in interest and reduction in term over the life of the loan.
From the mortgage calculator here:
http://www.homefair.com/tools/mortgage-payment-calculator/index.asp
For a $100k 30 year fixed loan at 7%, you save a little less than $33k in interest and pay off the loan almost 6 years early! Behold the power of compound interest!
@DallasLoanGuy wrote:i dont think they apply it.and the savings isnt from paying early.... the interest savings is from making 26 half payments which = 13 payments per yr
@Anonymous wrote:
@DallasLoanGuy wrote:i dont think they apply it.and the savings isnt from paying early.... the interest savings is from making 26 half payments which = 13 payments per yr
From my understanding (recognizing that as an LO, your's is probably superior!), it depends on the program, but it seems that the majority don't actually credit payments immediately, and even if they did, you're right that the vast majority of the savings would come from the extra payment money anyway. As I noted in a follow-up post, paying twice a month with no "extra" money saves about 1 monthly payment's worth of interest if they calculate interest twice a month based upon immediate application of the payment. Pretty paltry compared to the 6-7 years of payments saved by increasing your payment amount by (13/12) annually, even without "immediate application" of the payment.
Arturoch wrote:So will it be a good idea to get these program or no? i am closing next week if everything turns out fine and i am seeing if it will be a good idea to register into these program does it pay off? is it wouth it? would you recomend it?
@DallasLoanGuy wrote:
@Anonymous wrote:Thanks everyone - I think I will steer clear of this. Thanks!it is what it is.... and it WORKS.....!!!knocks 7yrs off the end of the note.... if you can budget it.you are only making one extra pmt per month... in a way that you should be able to stick to.do not discount it.