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Brandon432 t1_ixxhvdj wrote

Reply to comment by Fabulous-Ad6844 in Delayed Mortgage Monthly Payment at WF by gundamstar1

Absolutely 100% false for mortgages

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AlanPavio t1_ixxj3mw wrote

It’s amazing that this is said almost every time someone talks about mortgages and interest. The vast majority of mortgages are not simple interest - I think people get used to it being that way with car loans and then assume it’s the same with their mortgage.

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Brandon432 t1_ixxk67f wrote

Right. Even my biweekly payment does not save interest because I pay half the balance two weeks early every month. It saves interest because I make two extra payments per year and pay off the whole thing six years early.

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GaiusPrimus t1_ixxvz9p wrote

This isn't true everywhere, which is most likely the cause why it gets brought up.

Canada is mostly simple interest mortgages.

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Fabulous-Ad6844 t1_ixxvtj5 wrote

“Note A bimonthly mortgage may also save you some interest if your mid-month payment is applied to your principal when the lender receives it. However, most lenders offer bimonthly mortgages as a tool of convenience and don’t apply your payments until the end of the month—which means a bimonthly mortgage typically doesn’t lead to interest savings.”

https://www.thebalancemoney.com/what-is-a-bimonthly-mortgage-5210262

Depends on the lender.

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Brandon432 t1_ixxxjkp wrote

4 properties, 7 mortgages (inc refi and HELOC) and probably 20 servicers. Haven’t found a lender that applies payment mid month.

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Fabulous-Ad6844 t1_ixyld0n wrote

I did. I’d pay extra mid monthly & confirmed with them it would reduce the principal & the interest calculated from that day.

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Brandon432 t1_ixz45xn wrote

We are saying different things. If you pay EXTRA, yes, it will reduce your principal and interest. If you simply pay EARLY, it will not.

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Fabulous-Ad6844 t1_ixzb3xp wrote

Well an extra payment is an “early payment”. But I understand that some institutions won’t apply an early payment to reduced outstanding Principal.

Fun fact - in Australia they have what they call “Mortgage Offset” accounts. Basically it’s like a savings account, but instead of earning interest it is offset against the outstanding Principal of your mortgage on daily interest calculations. Thereby you “earn”the interest rate of your mortgage. I was very surprised the US doesn’t have these. They’re great because you can almost pay off your mortgage but still pull the funds out instantly if you need them.

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