A Free Monthly Payment Through Mathematics
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| Free Money |
Who does not like free money? To understand this trick that banks do not share with customers, you have to see an example. Let's say that the value of the house is $312.500. The deposit is 20%, ie. $62,500. So if we deduct payment off of the value of the house, the home loan is $250,000.
If the interest is 6% and payments are to 30 years, then the monthly payments will be $1,500.48.
This means that the value of total payments of interest that will accrue during this time will be $289,772.52. If we add the value of the house to this amount, it gives us a total of $602,272.52. In short, once you consider interest, the total amount paid for the house is almost twice the initial value, and that's despite the fact that the interest in this example is low.
If the interest rate was 8%, the total payments would be $722,691.15 including interest, which is much more than before. In fact, there is an additional difference of $120,418.63 for only two percent of additional interest. No doubt that having a good credit history is important to be able to save lots of money all the time.
Returning to the example with the 6% interest, look at what happens if instead of making full payments, as usual, we make half payments every half month. The total monthly payments remain the same. But instead of paying $1,500.48 every 30 days, we pay $750.24 every 15 days.
Almost magically and without any extra money, you would save one and a half months of payments by only changing payment times.
Rather than paying off the house in 360 months, you would in 358.5 months. In addition, total interest payments will be $287,891.60, resulting in a savings of $1,880.92 without having to pay a dollar more.
If the interest is 6% and payments are to 30 years, then the monthly payments will be $1,500.48.
This means that the value of total payments of interest that will accrue during this time will be $289,772.52. If we add the value of the house to this amount, it gives us a total of $602,272.52. In short, once you consider interest, the total amount paid for the house is almost twice the initial value, and that's despite the fact that the interest in this example is low.
If the interest rate was 8%, the total payments would be $722,691.15 including interest, which is much more than before. In fact, there is an additional difference of $120,418.63 for only two percent of additional interest. No doubt that having a good credit history is important to be able to save lots of money all the time.
Returning to the example with the 6% interest, look at what happens if instead of making full payments, as usual, we make half payments every half month. The total monthly payments remain the same. But instead of paying $1,500.48 every 30 days, we pay $750.24 every 15 days.
Almost magically and without any extra money, you would save one and a half months of payments by only changing payment times.
Rather than paying off the house in 360 months, you would in 358.5 months. In addition, total interest payments will be $287,891.60, resulting in a savings of $1,880.92 without having to pay a dollar more.
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| Save Money |
It is very important that the first payment is sent complete because only half the payment may result in a notice of nonpayment. Once the first payment is complete, start making half payments every two weeks.
Banks do not like you to make partial payments because it costs them more to process the additional payments, all for a lower yield. At least in the United States, banks have to accept and record payments when they arrive. To be sure if this can work or not, you just have to read the contract to verify that there is no penalty for making additional payments before the due date.
As we saw earlier, buying a home means paying nearly double thanks to the interest that accrues. For this we must try to save wherever possible. With this trick, you can save a monthly payment and a little more.
This trick saves you money without costing any more. And if at the end of all, you do not want the $1,880.92, then tell me and I will accept it for you.
Banks do not like you to make partial payments because it costs them more to process the additional payments, all for a lower yield. At least in the United States, banks have to accept and record payments when they arrive. To be sure if this can work or not, you just have to read the contract to verify that there is no penalty for making additional payments before the due date.
As we saw earlier, buying a home means paying nearly double thanks to the interest that accrues. For this we must try to save wherever possible. With this trick, you can save a monthly payment and a little more.
This trick saves you money without costing any more. And if at the end of all, you do not want the $1,880.92, then tell me and I will accept it for you.
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