Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.3 4.3bsd-beta 6/6/85; site lzaz.UUCP
Path: utzoo!watmath!clyde!cbosgd!ihnp4!lzaz!mkg
From: mkg@lzaz.UUCP (Marsh Gosnell)
Newsgroups: net.consumers
Subject: Re: Semi-monthly mortgage repayments
Message-ID: <416@lzaz.UUCP>
Date: Thu, 14-Nov-85 16:58:27 EST
Article-I.D.: lzaz.416
Posted: Thu Nov 14 16:58:27 1985
Date-Received: Sat, 16-Nov-85 01:17:42 EST
References: <1389@decwrl.UUCP>
Organization: AT&T Information Systems, Lincroft
Lines: 29
Summary: half pay mortgages aren't worth it

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.

Check the fine print.  All of the half pay programs I've seen call for
you to pay half the amount every two weeks (not twice a month).  Having
recently purchased a house, I carefully investigated this kind of mortgage
and concluded that they aren't worth it.

The programs I investigated called for payments every two weeks to be
deducted automatically from a checking account you MUST have with the
bank.  One bank I checked with will drop you from the half pay program
if you don't have sufficient funds in your checking account to cover a
payment (e.g., NO late payments allowed).

Almost ALL of the interest savings come not from the fact you are paying
more often but because you are paying the equivalent of 13 "monthly"
payments each year.  If you were to take out a conventional 15 or 30 year
mortgage and pay 1/12 extra each month you pay off the mortgage within a
month or two of the half pay mortgage.  With the conventional mortgage,
you aren't forced to maintain a checking account with the bank, you have
a grace period for late payments, etc.

I wouldn't bother with a half pay mortgage.
   Marsh Gosnell   lzma!mkg