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From: stj@calmasd.UUCP (Shirley Joe)
Newsgroups: net.invest
Subject: Re: Question about Home mortgages
Message-ID: <414@calmasd.UUCP>
Date: Fri, 31-May-85 15:45:21 EDT
Article-I.D.: calmasd.414
Posted: Fri May 31 15:45:21 1985
Date-Received: Mon, 3-Jun-85 00:25:50 EDT
References: <110@novavax.UUCP> <3766@alice.UUCP>
Reply-To: stj@calmasd.UUCP (Shirley Joe)
Organization: Calma Company, San Diego, CA
Lines: 40
Keywords: accelerated payments

In article <3766@alice.UUCP> ark@alice.UUCP (Andrew Koenig) writes:
>Which is better, a 15 year loan as 12.25% or a 30 year loan at 12.75%?
>Answer: it depends, among other things, on what you can afford,
>how much it's worth having more money available now, and so on.
>To be specific, let's consider a $60,000 loan.  For 30 years at
>12.75 percent, your payment would be $652.02, for 15 years at
>12.25%, it would be $729.78, and for 15 years at 12.75% it would
>be $749.30.
>
>First, let's compare 30 and 15 years, both at 12.75%.  The 30-year
>term is clearly superior, regardless of the time value of money or
>anything else, because you always have the option of paying it
>off over 15 years and you will be in exactly the same situation
>as if you had taken out a 15-year loan in the first place.  Thus
>the 30-year term gives you everything the 15-year term does, plus
>some extra flexibility.

I agree.  With the 15 year term, you are stuck with the higher
payments, even though the interest rate is lower.  You MUST make that
higher payment every month, plus you won't get to deduct as much
interest each year (assuming that the tax laws don't change
drasticly).  However, if you want to pay off your 30 year mortgage in
less than 30 years, there is a way to do it without making a higher
payment per month.

This method is a way that you can pay off a 30 year mortgage in roughly
half the time (~15 years) without paying more each month.  You make two
payments per month, but each payment is 1/2 the normal monthly payment.
You are still paying the same amount each month, but apparently the
interest you save makes a big difference.

Another method is to make a payment every 4 weeks instead of once a
month.  You end up making 13 payments per year instead of 12, but again
the interest savings are enormous (we can't afford to do this).

Before you go off and try this, you must check with your lender to make
sure they allow it.
-- 

Spike
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