Paying mortgage weekly or bi-weekly

[DianneDachyshyn]

We were wondering if it wouldn`t be a good idea to pay our mortgages either bi-weekly or weekly for a more significant mortgage pay down. Is anyone doing that with your properties? We have done that with our principal residence and it has made a huge difference. Why not do it for our revenue properties? I haven`t heard this topic addressed before and would love to hear others` ideas.

 

[TerryF]

We did this once pre-REIN, and did get good mortgage paydown but poor cash flow. Since becoming a REIN member, we have refinanced to 40 year amort. and pay monthly. The cash flow is huge now since refinancing. I guess you have to decide what you want and set things up for that. It seems to me that the REIN thinking is more `go for cash flow and the equity will take care of itself`, especially if you do the long term hold.

QUOTE (DianneDachyshyn @ Jul 24 2008, 03:56 PM) We were wondering if it wouldn`t be a good idea to pay our mortgages either bi-weekly or weekly for a more significant mortgage pay down. Is anyone doing that with your properties? We have done that with our principal residence and it has made a huge difference. Why not do it for our revenue properties? I haven`t heard this topic addressed before and would love to hear others` ideas.

 

[DianneDachyshyn]

Thanks. I didn`t think that it would affect cash flow that much, but if it does, then if wouldn`t be a good idea.

 

[invst4profit]

As a investor you look at the interest payments as a tax deduction and since the tenant is paying your mortgage not you there is really no reason to pay it down. Invest the extra money elsewhere and generate more income.
Your business goal should be to generate income and do everything to that end. When your mortgage gets payed down naturally or the value of the property increases it is best to re-mortgage and pull money out (more income) assuming the property still has positive cash flow.

 

[DianneDachyshyn]

Thanks for clearing that up. I agree about the cash flow. I just didn`t realize that changing the payments would affect that significantly. Enough said. We will stick with the monthly payments.

On a side note, has anyone made the switch from a fixed rate to a variable as Dan Heon suggested at a recent meeting? It would mean paying a penalty up front, but that amount would be returned within 10 months or so. The difference in cash flow for two of our properties (our fixed rate is now 5.84%) would be just over $200 each per month. It would cost us $2200 each, however, for an interest penalty. Any thoughts on that?

 

[Conrad5]

QUOTE (DianneDachyshyn @ Jul 25 2008, 07:08 AM) Thanks for clearing that up. I agree about the cash flow. I just didn`t realize that changing the payments would affect that significantly. Enough said. We will stick with the monthly payments.

On a side note, has anyone made the switch from a fixed rate to a variable as Dan Heon suggested at a recent meeting? It would mean paying a penalty up front, but that amount would be returned within 10 months or so. The difference in cash flow for two of our properties (our fixed rate is now 5.84%) would be just over $200 each per month. It would cost us $2200 each, however, for an interest penalty. Any thoughts on that?


If you are sure that after 11 months the variable rate you are getting is going save you money then that should be your best option. Because as you indicated it is going to take you 11 months to recoup the penalties should you convert now.

 

[hutchins888]

QUOTE (caglah @ Jul 25 2008, 07:17 PM) If you are sure that after 11 months the variable rate you are getting is going save you money then that should be your best option. Because as you indicated it is going to take you 11 months to recoup the penalties should you convert now.

You should take a look at using a money merge account for your investment properties (available for single or multi-properties. You can check my profile for more information if desired.

 

[Thomas Beyer]

QUOTE (invst4profit @ Jul 25 2008, 06:37 AM) As a investor you look at the interest payments as a tax deduction and since the tenant is paying your mortgage not you there is really no reason to pay it down. Invest the extra money elsewhere and generate more income.
Your business goal should be to generate income and do everything to that end. When your mortgage gets payed down naturally or the value of the property increases it is best to re-mortgage and pull money out (more income) assuming the property still has positive cash flow.
Amen to that !

The bank is the biggest beneficiary in a mortgage paydown as it reduces their risk .. if you fail to pay they can foreclose and have more equity !

If your goal is financial freedom, you need to increase the amount of cash-flowing real estate owned .. and to do that you need cash to buy more assets .. from your own pockets or other people .. and as such paying down a mortgage reduces your cash in your pocket and lowers your ability to buy more assets.

of course, you should be mindful of real estate cycles, reserves and the ability to hold LONG TERM (say 10 years plus) as true wealth is not build by speculative flips or owing one asset mortgage free .. but MANY assets that all break even or cash flow on a monthly basis .. as the equity increases every month even if the market is totally flat !

See more on making money even in a flat market:

Making Money in a flat market

and also "what is better: LOC or mortgage" here: LOC or Mortgage

and on real inflation vs. published price increases, proving that in the long term you will always have 3-5% annual upside, on average:

Real Inflation vs. Published Government Lies

 

[KimFranz]

Regarding the changing fixed to variable rate - I have a great banker at Scotiabank that totally gets real estate investing and she was able to change my one fixed rate to variable and didn`t charge me any fees or penalties... it`s definitely about relationships!!!

Kim

 

[DianneDachyshyn]

Wow! That`s a good deal. I agree with you, Kim, about relationships. We are getting a mortgage from a local banker, and she is knocking herself out for us. She is paying for the appraisal and giving us a 40-year amortization. She even rolled back the interest rate on a HELOC for our partner, using a previous expired offer.