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From: ark@alice.UucP (Andrew Koenig)
Newsgroups: net.consumers
Subject: Re: Mortgage Payoffs....
Message-ID: <4633@alice.UUCP>
Date: Thu, 28-Nov-85 10:38:55 EST
Article-I.D.: alice.4633
Posted: Thu Nov 28 10:38:55 1985
Date-Received: Fri, 29-Nov-85 08:34:50 EST
References: <4600002@hplsla.UUCP>
Organization: Bell Labs, Murray Hill
Lines: 15

> The ROUGH figures I have heard is that paying bi-weekly instead of
> monthly will cut a 30 year loan to 18 years and save GOBS of money. 
> (I can probably figure this out exactly if pressed).

Yes and no.  Yes, you'll cut the term to 18 years.  No, you won't
necessarily save GOBS of money.  You have to figure the net present
value of your outlays each way, and you have to base that on some
kind of interest rate.  If the rate is 0, then yes you'll save gobs.
If the rate is greater than your mortgage rate, you'll lose gobs.
If the rate is the same, it's a wash.  Whether you should pay off
quickly or not depends on what else you would do with the money.
For instance, if you were to pay more slowly and invest the excess
in, say, tax-free municipal bonds at an interest rate greater than
your mortgage interest rate times your marginal tax rate, then you'd
come out ahead.