Which is better? pay mortgage, or half mortgage

[momto2greatkids]

Get paid on the 15th and the 30th. Car payment is due on the 30th and mortgage on the 1st.

 

Which would be better to do?

 

Pay the full mortgage payment on the 15th and the car on the 30th.

Or pay the car payment and half the mortgage on the 15th the other half on the 30th.

 

Which would save more in interest?

[DHK]

Please post the rates, terms and balances you're paying on both the car and the house so we can do some comparisons.

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Please tell me that you have a grace period to make your car payment? Or that your car loan is at the same bank that you have your checking account? I'd hate to see you have late fees.

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I have a simple mortgage loan program that I used to try to compare what your payments would be like - Monthly to Bi-monthly. Here's the figures I used: $400k loan, 6.5% interest rate, 30 year fixed period. (Hey, I live in Cali, not Tennessee.)

 

Monthly payment: $2505.61

 

Bi-weekly payment: $1155.89

 

Double that bi-weekly payment for the average monthly payment: $2,311.78

 

It APPEARS that you'd save money doing things this way. In comparing the math for 1 year's worth of payments, you'd be paying:

 

12 monthly payments: $30,067.32

 

26 bi-weekly payments: $30,053.14 (a savings of $14)

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So the real question is, is it worth it to save $14? (figuratively; obviously your numbers will be different)

[momto2greatkids]

Our mortgage is with the bank we bank at, our car loan is with another bank. Pay checks are direct deposit and I can pay both(car and mortgage) over the phone with no fees. So no problem paying them the same day we get paid and the mortgage has a 15 day grace period and the car has atleast 10 but I'm thinking it's 15.

 

Our mortgage

$68,112 (amount of loan)

6% interest

30 year loan

Nov of 2003.

 

Still looking for the car papers (had to of put them in the wrong file in the file cabinet, take a while to find). It's around

18,000 (amount of loan)

4.5%

5 year

july or Aug 04.

[rpatty]

My guess is neither system will make a particularly large difference in your interest savings. It might be a little, but not much. If you want to see some tremendous savings, try tacking an extra little something to every single mortgage payment. I'd bet $50 -$100 per month would shave YEARS off of your payoff date and save a very large pile of interest.

 

Before going bimonthly, if you do indeed go that way, you might want to check and make sure your bank is okay with that. Some of them won't accept checks for less than a full month's payment, or may have other clauses where partial payments get held until the end of the month anyway.

[s1100]

Pay off the car as fast as you can save on car insurance. That would be my choice

[Clarkfan2]

Just don't pay for the ability to pay your mortgage bi-weekly. Bi-weekly payments are about the same as sending in one extra monthly payment in a years time. (12 Monthly payments vs 26 Bi-weekly payments = 13 monthly) Yes you will save a little more than that but don't go paying hundreds of dollars to pay bi-weekly when you can send in an extra principal payment at will and accomplish almost the same thing.

 

Instead of paying the home off early, personally I would try to get rid of the vehicle debt quickly. Since a vehicle drops in value like a rock (depreciates) I would almost encourage you to sell it...lol Your home will appreciate in value so there is a chance that your leverage for the home will be a positive cash flow....vehicles hardly ever are...they lose value quickly so the less cash you have in one (Example: always buy used) the better off financially you are.

 

Good luck whatever you decide.

[madflower]

There is no sense in paying off your mortgage early. Interest rates haven't been lower. IF/when interest rates do go up say to 10%, you will/should have a stack of cash to make more money then the 6% you are paying for the money on your house with simple investments like bonds or CD's.

 

You also want to diversify your investments, you don't want all your money tied up into one investment ie your house.

[hesiden]

Pay off the car as fast as you can save on car insurance. That would be my choice

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How does owning the car help with the insurance?

 

Or do you mean reduce the coverage?

[shop_free]

Pay off the car as fast as you can save on car insurance. That would be my choice

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How does owning the car help with the insurance?

 

Or do you mean reduce the coverage?

<{POST_SNAPBACK}>

 

I think he means reducing the coverage.

For me my annual amt went from a little over $1200 to $550

[madflower]

Reduce the coverage or raise your deductible. My loan required like a 500 dollar deductible. I upped that to 1000. It however means, in my state, Michigan, that if the accident is my fault I have to come up with a grand instead of 500 bucks but it will drop your premiums by a couple of hundred dollars.

 

They always add crap like roadside assistance, towing, etc. too, which I dropped. I used roadside assistance once in 10 years. And that was just because I locked my keys in the car during lunch. I could have gone home and gotten the extra set otherwise. Never had to use towing either.

 

The LAST part. is if you have a junker and worth maybe 2k, it is in your best interest to just drop to the lowest coverage which in no fault states, it is PL/PD (personal liability/property damage) which pretty much covers your butt. but instead of paying like 800/yr for my car instead. I pay 400 which as long as I dont cause an accident for 2 years. I basically have saved enough money to cover the loss which I would incur. If i go for longer, that is just money in my pocket.