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From: ark@alice.UucP (Andrew Koenig)
Newsgroups: net.consumers
Subject: Re: Semi-monthly mortgage repayments
Message-ID: <4555@alice.UUCP>
Date: Wed, 13-Nov-85 10:24:16 EST
Article-I.D.: alice.4555
Posted: Wed Nov 13 10:24:16 1985
Date-Received: Thu, 14-Nov-85 20:32:50 EST
References: <10961@ucbvax.BERKELEY.EDU>
Organization: Bell Labs, Murray Hill
Lines: 21

>>
>>I have recently read about a new type of real estate mortgage agreement,
>>in which the bank gives the buyer a mortgage at the normal insterest
>>rate for, say, a 30-year, fixed-rate mortgage, but allows the mortgagor
>>to pay off the loan semi-monthly rather than once a month.  The total
>>monthly payments are the same, they are just split in half and paid
>>twice a month.
>>
>>The incredible part of this is that you manage to reduce your interest
>>[...]  and you pay off what would
>>have been a 30 year mortgage in something like 12 years.
>>

>12 years seems a much smaller time period than 30 and is not very believable.
>Could someone post a formula either verifying '12 years' or giving the
>correct period of time based on the above pay off arrangement?

If you pay twice a month instead of once, and your payments are
half what they would be otherwise, you pay off the loan in half
the time (believe it or not)!  So the number above should have
been 15 years, not 12.