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Path: utzoo!linus!philabs!cmcl2!seismo!rlgvax!dennis
From: dennis@rlgvax.UUCP (Dennis Bednar)
Newsgroups: net.consumers
Subject: Re: Semi-monthly mortgage repayments
Message-ID: <832@rlgvax.UUCP>
Date: Wed, 13-Nov-85 23:32:50 EST
Article-I.D.: rlgvax.832
Posted: Wed Nov 13 23:32:50 1985
Date-Received: Fri, 15-Nov-85 08:09:33 EST
References: <1389@decwrl.UUCP> <10961@ucbvax.BERKELEY.EDU>
Distribution: na
Organization: CCI Office Systems Group, Reston, VA
Lines: 47

> In article <1389@decwrl.UUCP> marks@yogi.DEC writes:
> >
> >I have recently read about a new type of real estate mortgage agreement,
> >in which the bank gives the buyer a mortgage at the normal insterest
> >rate for, say, a 30-year, fixed-rate mortgage, but allows the mortgagor
> >to pay off the loan semi-monthly rather than once a month.  The total
> >monthly payments are the same, they are just split in half and paid
> >twice a month.
> >
> >The incredible part of this is that you manage to reduce your interest
> >[...]  and you pay off what would
> >have been a 30 year mortgage in something like 12 years.
> >
> 
> 12 years seems a much smaller time period than 30 and is not very believable.
> Could someone post a formula either verifying '12 years' or giving the
> correct period of time based on the above pay off arrangement?
> 
> 						Ilya	(...!ucbvax!ilya)

Pure hogwash!!  I have a personal mortgage program, and I ran it with 4 tests
in which the amount borrowed was constant ($100,000), and the interest
rate was constant @ 12% per year, but I varied the number of years, and
I varied the number of payments per year.  The results were:

Test	Years		Payments Per Year	Avg Monthly Payment
1.	30		12			$1028.61
2.	12		24			$1311.96
3.	12		500			$1310.56
4.	30		24			$1028.35

As you can see, the average monthly payment went up ~$200 between
(1) and (2).  I then thought that maybe bi-monthly payments were
too many days apart, so in (3) I jacked the number up to 500,
(interest computed more than once per day), BUT it was
about the same amount as (2), unfortunately.  Last, I wanted to
see how much the avg monthly payment went down just by going from
monthly to bi-monthly payments (compare (1) and (4)), and it didn't
seem to matter that much, either.

I will post mortgage.c to net.sources.  Also, I remember seeing
a loan.c program about 2 years ago, which I think was posted to
the net.  It would be interesting to compare the output of the
2 programs.
-- 
Dennis Bednar	Computer Consoles Inc.	Reston VA	703-648-3300
{decvax,ihnp4,harpo,allegra}!seismo!rlgvax!dennis