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Question about paying off home loan faster.

Messages
14,795
As I understand it, interest is calculated daily and then charged at the end of the month.

If I was to pay an extra amount every week, say $70 on top of my repayment, does it chip away faster at the loan if you pay $10 a day, or just $70 per week as you get paid, (assuming a weekly pay cycle?)

I currently am making repayments on a daily basis.

Any advice is appreciated.
 

Vic Mackey

Referee
Messages
24,498
Are you P&I or Interest Only?

Fixed or Variable?

There's not a huge difference mate, like I mean not even a cup of coffee a month. I'd just do the $70 in one hit. An extra $3,640pa will start to eat away at the interest.
 

Last Week

Bench
Messages
3,643
Have a look at this mortgage calculator.

https://m.drcalculator.com/mortgage/

It's the best one I've found online and gives really comprehensive information on your loan.

Extra repayments always help, that's why we'll be paying our mortgage fortnightly. (we're building) Essentially making 13 months as opposed to 12 if it were monthly. Weekly repayments I think are near the same as fortnightly.

Talk to a broker. Your $140 a fortnight might be put to better use in an offset account.
 
Messages
14,795
Are you P&I or Interest Only?

Fixed or Variable?

There's not a huge difference mate, like I mean not even a cup of coffee a month. I'd just do the $70 in one hit. An extra $3,640pa will start to eat away at the interest.

P&I, variable.

Not sure whether doing $10 a day is the same as dropping $70 on payday. Would have though since interest calculates daily the earlier you put the whole extra repayment amount on at once. Wife is going back to work shortly with a view of putting her salary on the house, will it make a difference with a larger amount?
 
Messages
14,795
Have a look at this mortgage calculator.

https://m.drcalculator.com/mortgage/

It's the best one I've found online and gives really comprehensive information on your loan.

Extra repayments always help, that's why we'll be paying our mortgage fortnightly. (we're building) Essentially making 13 months as opposed to 12 if it were monthly. Weekly repayments I think are near the same as fortnightly.

Talk to a broker. Your $140 a fortnight might be put to better use in an offset account.

My mate used to be a broker, he said it was offset or faster repayment was more or less the same difference. He said to basically just put as much as we could into the repayments or an offset account.
 

Last Week

Bench
Messages
3,643
My mate used to be a broker, he said it was offset or faster repayment was more or less the same difference. He said to basically just put as much as we could into the repayments or an offset account.

In that case, the only advantage I can see in the offset is that you can drawing on that money if you need it. Which I think is a good option to have.

In the early years of your loan, you're paying f**k all of your principal. It's mostly interest. An offset would help keep those costs down or, likely, you'd be paying off your principal quicker.
 

sensesmaybenumbed

Moderator
Staff member
Messages
28,830
We had an offset account.

Had.

And that's a compliment. They are awesome.
Just be disciplined with it within reason.
 
Messages
14,795
In that case, the only advantage I can see in the offset is that you can drawing on that money if you need it. Which I think is a good option to have.

In the early years of your loan, you're paying f**k all of your principal. It's mostly interest. An offset would help keep those costs down or, likely, you'd be paying off your principal quicker.

As I understood it, you paid higher interest on your offset, basically with my bank the cash rate is applied to the home loan rate. That's how they get you.
 

___

Juniors
Messages
860
I have an interest-saver off set. That means the interest I'm charged is based on what's in the offset. So if I have a $500,000 loan, but $100,000 in the offset, the interest charged is based on a $400,000 loan, not $500,000.
 
Messages
14,795
3.82% is a real good rate atm. Who are you with?

St. George.

They're merkins, once we've paid it off I'm discharging the mortgage and going through another lender to finance our knockdown & rebuild. Nearly f**ked our finance on our first home that we built and bullshitted us and stung us with this home. Needed bridging finance between our purchase and sale though so we just stayed with them as it was easier.
 

sensesmaybenumbed

Moderator
Staff member
Messages
28,830
St. George.

They're merkins, once we've paid it off I'm discharging the mortgage and going through another lender to finance our knockdown & rebuild. Nearly f**ked our finance on our first home that we built and bullshitted us and stung us with this home. Needed bridging finance between our purchase and sale though so we just stayed with them as it was easier.
Make sure you turn the knife. You never know, a better deal might be offered.
 

Vic Mackey

Referee
Messages
24,498
St. George.

They're merkins, once we've paid it off I'm discharging the mortgage and going through another lender to finance our knockdown & rebuild. Nearly f**ked our finance on our first home that we built and bullshitted us and stung us with this home. Needed bridging finance between our purchase and sale though so we just stayed with them as it was easier.

You can change anytime mate. Go see a broker. I've always found mortgage choice great to deal with.
 

Eion

First Grade
Messages
7,601
You can change anytime mate. Go see a broker. I've always found mortgage choice great to deal with.
I've always thought the shop around thing is dangerous. No one ever talks about the length of a loan.

With many of us stretched and paying close to minimum, there's a pretty good chance we run close to the full life of the loan.

If you have an interest and principal loan of say $400k for 25 years, you basically end up paying $800k over the life of the loan. But the lender loads the interest in the first half of the loan cycle, which is why you don't see your loan decrease for years.

So, just say you go with another lender after 10 years, you would have paid shitloads of interest over those 10 years to your old lender, but made no real inroads into your mortgage and most people restart their mortgage clock back to 25 years when they refinance.

When I've looked into it, I've asked to compare repayments based on the end date of my current mortgage,and it's not been worth it, not even close.

Anyway...I'm probably rambling and don't even know if I'm making sense,after a couple beers.
 
Messages
14,795
You can change anytime mate. Go see a broker. I've always found mortgage choice great to deal with.

On a good rate and we're hoping to have it paid off in less than five years. Not going to f**k around now. Would rather f**k them out of their interest first and then walk out.

A means to an end, just as we were for them.
 

Lambretta

First Grade
Messages
8,679
Charlatan

Mortgages is what I do

If you are on a variable loan with the ability to make additional payments without penalty at 3.82% you are on a reasonable deal

There is no point taking an Offset if the rate on that product is 1.5% higher - you won't make any savings

That said - it's strange that your bank has such a rate discrepancy - most banks would offer a pro pack with Offset at around that rate - including STG

Regarding your original question - does it make much difference to pay daily rather than weekly
In short - no it doesn't. It does make a very slight difference, but not that you'd notice

With mortgages, pay extra and try not to draw it back

On a $500,000 mortgage @ 3.82% (over 30 years) the monthly payment = $2,335.50 per month
Over a year this makes your repayments $28,026

Banks often (not all, but most) calculate their weekly repayment by dividing the monthly amount by 4
2,335.50 / 4 = $583.86 x 52 = $30,361.50

$30,000 is MORE than $28,000 - just making that change from monthly to weekly repayments reduces the loan term by 4 years from 30 years to 26 years - but remember it's not the frequency itself which is benefiting you, its the fact you are paying MORE

If you divide $30,361.50 by 12 you get $2,530 per month

PAY THAT AMOUNT MONTHLY AND YOU REDUCE YOUR LOAN FROM 30 YEARS TO 26 YEARS

In other words, the frequency makes f**k all difference - it's simply the additional repayment which makes the difference. There is a slight interest benefit to weekly - over a 25 year loan, it equals about 2 weeks repayments. In other words, two tenths of f**k all.

Where OFFSET differs, is that the money in your bank account reduces the interest on your mortgage.

If you run your bank account with $40,000 in it, this would save you $125 a month in interest
If your bank account runs with $3,000 a month in it, this saves you around $9.50
So the Offset benefit really depends on how much you have in your bank account

But in all honesty, if you had $40,000 in your bank account, you could pay the majority of that off your loan and save yourself the interest anyway

In other words, Offset is only really beneficial if you get it for no additional cost
 

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