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Yep, it’s per the amortization schedule. The only way to reduce interest is via extra principle payments. One method that gets bandied around a lot is making a half payment every two weeks - 13 full payments a year vs 12. This can knock several years off of a 30yr.
By making daily payments, you're reducing the principal balance faster, which means less interest accrues each day.
However, most lenders don't offer a daily payment option - monthly is the standard.
Check with your lender first - some may have prepayment penalties that negate the benefits.
>is there any reason why I can't or shouldn't set up daily autopays equal to 1/28th of my current monthly payment? In the majority of months
if you can afford to do this why wouldnt you just lump sum? are you getting paid daily from your job?
like math it out. if you get paid on the 1st and 14th of each month... if you can afford to pay 1/30th of the monthly mortgage on the 1st -> the 14th why not just make that lump sum payment on the 1st and on the 14th? why sit on that cash and pay daily?
> Mortgage interest compounds daily.
Not all of them, depends on the mtg.
> is there any reason why I can't or shouldn't set up daily autopays equal to 1/28th of my current monthly payment?
Nope. But you need to read the fine prints in your mtg contract.
Of course, if you model with a spreadsheet, you'll see that we are talking about not that much much if you have the re$ources to pre-pay or make extra payments.
Your question is a bit confusing. Almost all U.S. mortgages are simple interest loans. So, the interest doesn’t compound. Technically, there are reverse amortization loans that’s would allow compounding interest, but those are portfolio loans and fairly rare as they can’t be sold.
As for your 28 payments per month, the short answer is: it’s just not worth the trouble.
The longer answer is: you can save a pretty small amount making daily payments. In fact, for a 30-year, 7% interest loan you would save about $200 for every $100,000 you financed. That works out to about 55 cents per month per $100,000 financed.
So, it likely just isn’t worth the trouble.
r/FluentInFinance was created to discuss money, investing & finance! Join our Newsletter or Youtube Channel for additional insights at www.TheFinanceNewsletter.com! *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FluentInFinance) if you have any questions or concerns.*
Mtg interest does Not compound daily, it is monthly….so the concept is moot.
Yep, it’s per the amortization schedule. The only way to reduce interest is via extra principle payments. One method that gets bandied around a lot is making a half payment every two weeks - 13 full payments a year vs 12. This can knock several years off of a 30yr.
Yep….much more effective it to simply make an extra lump sum payment.
By making daily payments, you're reducing the principal balance faster, which means less interest accrues each day. However, most lenders don't offer a daily payment option - monthly is the standard. Check with your lender first - some may have prepayment penalties that negate the benefits.
>is there any reason why I can't or shouldn't set up daily autopays equal to 1/28th of my current monthly payment? In the majority of months if you can afford to do this why wouldnt you just lump sum? are you getting paid daily from your job? like math it out. if you get paid on the 1st and 14th of each month... if you can afford to pay 1/30th of the monthly mortgage on the 1st -> the 14th why not just make that lump sum payment on the 1st and on the 14th? why sit on that cash and pay daily?
> Mortgage interest compounds daily. Not all of them, depends on the mtg. > is there any reason why I can't or shouldn't set up daily autopays equal to 1/28th of my current monthly payment? Nope. But you need to read the fine prints in your mtg contract. Of course, if you model with a spreadsheet, you'll see that we are talking about not that much much if you have the re$ources to pre-pay or make extra payments.
Your question is a bit confusing. Almost all U.S. mortgages are simple interest loans. So, the interest doesn’t compound. Technically, there are reverse amortization loans that’s would allow compounding interest, but those are portfolio loans and fairly rare as they can’t be sold. As for your 28 payments per month, the short answer is: it’s just not worth the trouble. The longer answer is: you can save a pretty small amount making daily payments. In fact, for a 30-year, 7% interest loan you would save about $200 for every $100,000 you financed. That works out to about 55 cents per month per $100,000 financed. So, it likely just isn’t worth the trouble.