Went to bi-weekly on mortgage

[dczech09]

If you expect to sell in a few years, it's all about equity, the sum you walk away with.

This is an excellent point and really lights up one important fact: it is advantageous to pay extra on a mortgage even if you plan to sell in a few years. Why? Equity. You equity position will follow you to your next house.

I just wanted to chime in with that. While I understand what you are getting at about the savings being 40% math and 60%, you should maybe use the 40% math to train your 60% mental as to why paying extra may be a good idea. There is definitely a lot of savings!

Do not get hung up on the mortgage tax deduction (if that is a hang up of your's). It really is not that great of a benefit in the end. As your mortgage balance shrinks, interest shrinks as well. As interest shrinks, the tax deduction shrinks. At some point, you will no longer itemize deductions (you would take the standard instead). At that point, the mortgage interest is no longer being deducted so it becomes a moot point.

Just food for thought.

[ua_guy]

The real problem I have with my mortgage is that I am paying $2100 in P+I and $1,250 of that is interest, so while overall the APR might be 3.75% over the life of the loan, right now it's higher than a payday loan. For folks like me that have never paid longer than 5 years on a loan, I am getting killed. Not sure how I get out of this other than paying cash for a house.

Just curious, but have you ever compared what your total expense would have been over the same time period, buying versus renting? I know if I was moving around a lot, I wouldn't think of buying/selling homes often as a way to come out ahead. Maybe if you're able to turn your home into a rental when you move, but the transaction costs to buy/sell are monumental. How did you overcome this?

[disneysteve]

Just curious, but have you ever compared what your total expense would have been over the same time period, buying versus renting? I know if I was moving around a lot, I wouldn't think of buying/selling homes often as a way to come out ahead.

Very true. I wouldn't buy a house unless I was pretty certain I'd be there for at least 10 years. We bought our one and only house in 1994 and expect to be there at least until we retire in another 12-15 years.

[corn18]

Just curious, but have you ever compared what your total expense would have been over the same time period, buying versus renting? I know if I was moving around a lot, I wouldn't think of buying/selling homes often as a way to come out ahead. Maybe if you're able to turn your home into a rental when you move, but the transaction costs to buy/sell are monumental. How did you overcome this?

Being in the military, we always looked at base housing first if it was available. In my 20 year career, we lived in an apartment, bout and sold 4 houses, lived on base once and rented once. Overall I neither made nor lost any money. That really sucks. Now that I am in the private sector, my company covers all the transaction costs associated with the sale of my home so if I do move, I will pocket any equity. Which I actually have some at this point. The military did not do that. You paid all costs for buying and selling a house, so it had better appreciate or you're out closing costs and realtor fees every time.

[disneysteve]

Being in the military, we always looked at base housing first if it was available. In my 20 year career, we lived in an apartment, bout and sold 4 houses, lived on base once and rented once... You paid all costs for buying and selling a house, so it had better appreciate or you're out closing costs and realtor fees every time.

That being the case, why would anybody choose to buy? If you know you aren't going to be in one place for more than 2-3 years, renting makes a whole lot more sense.

[Nika]

It's an option with Wells Fargo for my automatic payments. They will do weekly, every two weeks or once a month. THe weekly and biweekly just get put in holding until the monthly payment is due, so it doesn't reduce your interest. It just makes an extra payment each year towards principle because there are 12 months but 52 weeks. Same way I get 26 paychecks a year not 24 because I am paid every two weeks, not twice a month. Actually, my pension is twice a month and my work pay is every two weeks.

Cornfused yet?

Tom

There are such things as true bi-weekly. I have one with my credit union. The payment gets applied to the balance immediately, they do not wait until the end of the month to do it, and you do save a tiny bit on interest.

But, you can only set it up at the time you are getting your mortgage or re-financing, they don't let you do that at any time, only when they are writing the loan.

So yes, true bi-weekly's are rare, but they do exist!

[LivingAlmostLarge]

Don't most Military buy because they have BAH? At least that's what I know from family who keep moving and buying. They get a lot of nontaxable income and benefits. So they buy and keep as rentals.

[corn18]

BAH was a big reason. I got $2,200/mo tax free for housing. I lost that if I lived on base. But by living on base I had no risk when it came time to move. Most base housing is very nice these days.

[Petunia 100]

There are such things as true bi-weekly. I have one with my credit union. The payment gets applied to the balance immediately, they do not wait until the end of the month to do it, and you do save a tiny bit on interest.

But, you can only set it up at the time you are getting your mortgage or re-financing, they don't let you do that at any time, only when they are writing the loan.

So yes, true bi-weekly's are rare, but they do exist!

Your credit union must carry their own loans. That works out great for you! That "tiny bit" should really add up over time. A loan that is going to be sold (to Fannie Mae, Freddie Mac, etc.) and serviced would never work that way. Something to consider when choosing your lender.