The numbers never lie.
A few months back, I talked about how I set up my mortgage to pay itself monthly where each paycheck had an automatic amount taken out with the goal of paying an extra payment or two each year. Click here’s the prior post.
Multiple intelligent readers pointed out that this was stupid…….and today, I concede to them.
Why I Killed the Automatic Monthly Mortgage Payments
About a month ago, I received a letter in the mail regarding the drafts. Everything was good and it was more of an informational piece. However, this kicked me into doing some more research.
After looking further into it, I started to realize that they weren’t going to be paying the mortgage each time they auto-drafted from my bank account. They actually just sat on that money until the 1st of the month. I had misunderstood and thought they would pay 26 payments in a year versus 12 monthly payments.
Originally believing that 26 payments would be made, I figured that this would knock my principle down even faster. I was wrong. All that was occurring was when I had those two additional paychecks each year, that was added as principle on the following mortgage payment.
Mind you, I was going to be paying them a one-time initial fee of about $250 plus $5/draft (26 times per year) just to have them pay the mortgage at the same time I could.
You are probably thinking, “How’d you not realize that?”
I misunderstood that it was only going to be 12 payments to my mortgage and not 26. Yes, I should have asked more questions.
So, we stopped the program and got all of our money refunded for those fees.Continue Reading