Why is paying half of your monthly mortgage payment in the middle of the month and the half at the end of the month cuts the amount of total interest & years to the mortgage? I did not think the mortgage calculator is the same as a CC calculator. Can some please clarify.
2006-12-12 01:19:08 · 2 answers · asked by cmok168 2 in Business & Finance ➔ Renting & Real Estate
Assuming the interest is accrued daily, then the money you pay in the middle of the month will not accrue interest.
For example, say you pay 7% interest on a $100,000 loan, so you pay about $20 in interest every day. Assume your mortgage payment is $1000 each month. Then each month, $600 ($20 x 30) of your payment goes just to cover the interest. If you pay $500 in the middle of the month, $300 covers the interest, and your new principal amount is $90,800. So, your new daily interest accrual has dropped to $18. On your second payment at the end of the month, only $270. of your $500 payment goes to interest.
2006-12-12 01:41:05 · answer #1 · answered by Wundt 7 · 0⤊ 0⤋
You are paying down on the prin & int. faster. I don't think you mean exactly half though
2006-12-12 01:23:16 · answer #2 · answered by Anonymous · 0⤊ 0⤋