After being in my first house loan for about five of the first 30years in a fixed high interest home loans i heard tonight for the first time that if you pay half of your loan payment every 2 weeks that the loan would be payed off in 15 years. is that true?
2007-02-15 16:02:06 · 5 answers · asked by markmaxson@sbcglobal.net 1 in Business & Finance ➔ Renting & Real Estate
The rule of 72 has nothing to do with home loans.
The rule of 72 states that is you can earn 7.2% interest on your money, it will double in 10 years. If you can earn 10% on your money, it will double in 7.2 years.
2007-02-15 16:10:52 · answer #1 · answered by Anonymous · 2⤊ 0⤋
Although I am not sure if it will completely cut your payment time in half, I am sure that it will greatly reduce it. What they are suggesting is that you make 1/2 of your payment 2 weeks early every month. What this does is derease the amount of interest that you pay by decreasing the principle amount of your loan. The higher the interest rate, the more it helps. If your balance is lowered by that much for 2 weeks out of every month, that is money that you would have had to pay high interest on, and now you don't. Great money saving technique! Paying once a month and just including a little extra towards the prinicple helps as well.
2007-02-15 16:13:01 · answer #2 · answered by CynthiaMac 2 · 1⤊ 0⤋
The Rule of 72.
How long will it take me to double my money if I earn X%?
What return must I earn if I wish to double my money in X years?
Using the Rule of 72 When the Rate of Return is Known
An investor that knows he can earn 12% on his money may ask the question, “how long will it take to double my money at this rate of return?”. Using our handy Rule of 72, this is a snap to calculate! Simply divide the magic number (72) by the investor’s rate of return (12).
The answer (6) is the number of years it would take to double the investment.
Using the Rule of 72 When the Number of Years is Known
The Rule of 72 can also be used backwards. An investor that wanted to double his money in a certain number of years could use the rule to discover the rate of return he would have to earn to achieve his goal. A businessman that wanted to double his money in four years, for example, would divide 72 by four. The result (18%) is the after-tax compound annual rate of return he would have to earn to meet his goal on time.
Bi-weekly payment schedule.
What happens when you pay your mortgage bi-weekly? Since you make 1 payment a month, if you paid half of your monthly payment every two weeks you end up paying 1 extra mortgage payment a year. 12 months vs 52 weeks/2 (biweekly payments)=13 payments.
Since you're paying more towards pricipal on a 30yr note, more than likely you'll be able to shave about 7 years off, depending on your interest rate. Cut in half isn't practical...unless your interest rate is through the roof.
To see what would be shaved off your current mortgage use the calculator on the site below...tell me how it looks.
2007-02-15 17:00:33 · answer #3 · answered by Andrew Christison 2 · 0⤊ 0⤋
It applies to compound interest. Every time the interest paid or received adds up to 72 your money doubles. 12% money doubles in six years...7.2% 10 yrs...etc...its that simple...paying or receiving its the same...
2007-02-15 16:30:58 · answer #4 · answered by Real Estate Para Legal 4 · 0⤊ 0⤋
72 DIVIDED BY 12 = 6 (MONTHS MAYBE?)
I've heard the same thing but can't verify it.
2007-02-15 16:06:57 · answer #5 · answered by Moe J 3 · 0⤊ 0⤋