Cheers,
Dave Donhoff
Just some mortgage guy ;~)

They didn't want an EXTRA payment per month, just to split my current monthly payment into 2 bi-monthly payments, of exactly half each. Instead of paying, say, $2400/mo, they take out $1200 twice a month.

That helps the bank cuz they get half of the money ($1200) 2 weeks earlier. (Tho it helps the bank mostly cuz of the bonus setup fee they get)

That helps you, cuz that $1200 you paid 2 weeks earlier serves to not charge you quite as much interest, cuz you've paid a bit earlier.

That interest amounts to a lot, over time.

If you get paid from your employer monthly, then you're best to stay on a once-monthly payment plan. If you're paid bi-monthly, then you can have the payments go out right after your paycheck hits, which puts your money to work effectively 2 weeks earlier.

You would, however, be FAR better off by simply taking that setup fee that they charge, and applying that to extra principal on your next payment.

-mike.

Oh, and our mortgage company did NOT charge a fee. The use of the money (I imagine they can use the money to gain interest) would be how they make money on the deal.

Saucy

Does it show on your statement that they apply your bi-weekly payments when they recieve them? Or do they hold them until they have a full payment and then apply it. Do they also have to opportunity to hit you with late charges twice a month. I just divide my monthly payment by 12 and add that amount in principal to my check each month. Works out about the same.

Rick

Trouble is - when the investment's set up to be pretty well immediately available, usually the rate of return is low.

Not much fun to get 2% on invested emergency money - but be paying 5 - 7% on mortgage.

I often don't have emergency funds on hand, but have invested assets more than adequate to use as collateral for a loan in case of emergency - at lower rate of interest, as the loan is fully secured by easily-liquidatable assets, unlike the hassle of repossessing, towing, storing and selling a car used as collateral for a loan to buy it.

Canadians not allowed to use registered retirement accounts as collateral for loans - but if one carries a substantial amount in such a fund with that institution, usually they'll set up a loan that's officially unsecured, but at a lower rate than that usually charged on an unsecured loan.

When I make such a loan, though, the interest is not deductible.

Possible problem - if one gets laid off and goes to make such a loan to tide one over, when the bank asks who is one's employer and hears that there isn't one at present - the loan is more than likely refused.

But - a number of my investments are carried by the stockbroker. If I have regular, quality assets of, say, $10,000., the broker will lend me up to $5,000. without question. S/he doesn't care whether I'm employed or not.

Careful, though - if my $10,000. asset declines in value to $8,000. and I had borrowed the full eligible amount of $5,000., the broker will call me to ask me for a deposit of at least $1,000. to reduce my loan to $4,000.: by tomorrow, at the latest. More than likely s/he'll ask for $1,500. or so, to add a little cushion in case of further reduction in value.

If I can't come up with the required amount, then they must sell some of my asset - which results in a reduction in the amount of the asset underlying the loan.

Not a good course: I don't want margin calls for either my clients or myself.

Here in Canada, mortgage interest on owner-occupied home is not deductible - but when home is sold for a gain, total amount of gain is tax-free.

Interest on money borrowed for non-registered investment is deductible, but on money invested in registered retirement account isn't - as the amount invested is deductible, within limits.

Many advisors suggest borrow to invest in retirement account, early in year before deadline, then when tax refund relative to the deduction for the retirement account investment arrives, use it to pay down loan, try to have loan paid off before year end.

Good wishes as you attempt to make your money work most effectively for you and yours,

ole joyful