Quote:
Originally Posted by THE SCUD
You sir, have tapped into what "the 99%" don't get - Well done. There is no free lunch: All these accelerated payment plans do is reduce the time period of your mortgage. So an accelerated bi-weekly, as you mentioned, simply increases your payments per year to mimic the same cash out the door as if you'd signed a ~21 year mortgage. You didn't save money or reduce the interest, you just reduced the amortization period of your mortgage.
What most people don't take advantage of is the fact that 90+% of mortgages allow you to make 2x the payment every month and a 10% lump sum payment every year. What's great about this is any amount you make over the normal payment goes straight to the principal, so you'll do a lot of damage to the interest over the life of the mortgage by doing that!
This gives you the flexibility to put, say, your bonus towards the principal every year, giving you huge bang for your buck.
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argh, i really wish i knew more about this crap. I really need to research mortage handling much much deeper.
on another note, I don't understand why our education system lacks the ability to provide the youth with any level of sound financial planning .