I made a mistake…
I am constantly trotting out the maxim that if something seems too good to be true then it is too good to be true. Well, I should have paid more attention to it when writing the article on how to cut the cost of your mortgage which appeared in The Irish Times yesterday. In that article I said that by paying a mortgage twice a month instead of once a month, more than €50,000 could be be knocked off a €300,000 mortgage over the course of a 30-year term. I said the savings would come at no additional or immediate cost to the mortgage holder.
This was wrong.
I could explain how the mistake happened but that’s largely irrelevant. The only thing that matters is that the article appeared under my name so I take full responsibility for it and apologise to anyone whose hopes I raised that such savings could be made without any cost to themselves.
The savings outlined only accrue when a person pays 26 fortnightly payments as opposed to 12 monthly ones. If you make 12 monthly payments of €1000 you pay €12,000 a year but if you make 26 fortnightly payments of €500 you pay €13000 which equals an extra month’s payment each year. This comes off the capital and reduces the term of the mortgage. While some savings can be made by simply splitting payments from once a month to twice a month, they are small as the mortgage holder is not paying off the capital any faster.
To add further to the confusion, the banks I spoke to last week said that twice monthly (or fortnightly) payments were possible yet when people contacted them on the back of my article they were told that they were not. Many of the banks say they will still facilliate fortnightly payments but some are now saying that they will not… They say they can do such a thing on an isolated case-by-case basis but if the practice was to become widespread it would upset their systems.
There are very real savings that can be made by paying a mortgage once every fortnight and it is a pity that some Irish banks have decided that they can not facilitate it.
But, this post is not about the banks. It is about my mistake. Again, I am sorry. And mortified.