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Congrats on launching! I just want to vent about something bank-related, and hopefully bait someone to tell me how this solves it. Or something else solves it.

Congrats on launching! I just want to vent about something bank-related, and hopefully bait someone to tell me how this solves it. Or something else solves it. Have you ever heard how you could pay off your mortgage a lot quicker by making bi-weekly payments instead of monthly? Or how you can include extra with your payment and instruct your bank to apply it directly to the premium, helping you reduce your interest? TLDR, I think people giving this advice haven’t tried applying it. Well, I wanted to do that - but in practice I found it near impossible to accomplish. First - any form of electronic bill-pay is right out of the window, because any extra payments or amount - the bank will apply as pre-paying your next scheduled payment, which means you are pre-paying not just principal, but the interest as well. Why would anyone want to do that? The bank helpfully told me that “some people maybe are going on vacation and will be away when the bill is due”. Yeah… You can try to submit a paper invoice with special instructions by postal mail. Then it may or may not work. I don’t know if it’s incompetence or outright customer-hostile behavior from the bank, but this method succeeded only some of the time. You have to follow up by phone to find out and even so making any corrections after the fact is difficult and requires multiple call transfers and waiting on hold.

kemitche 5y ago
I am able to add additional premium payments to my payment, or as a separate payment, via my online mortgage payment site. It sounds like the bank/site your loan is under is actively hostile towards such payments. I don't know enough about mortgages to know how to help you solve your side, though.
- lbotos 5y ago
  The most sad part is, while I'm not OP, I had a bank that supported bi-weekly payments, my mortgage was sold, and the new bank doesn't. What a kick in the pants!
  - arcticbull 5y ago
    They're saving you money by not supporting bi-weekly payments :)
    - lbotos 5y ago
      I assume you mean because the extra money that I'm putting into my house could make more money in the market so instead of a 13th payment, get gains in the market?
      - arcticbull 5y ago
        Well, as long as your (interest minus interest tax credit) rate is below inflation, youre better off putting that money in a 0% interest savings account than paying down the debt faster. Or consider 7% from a Series I bond, or investing it in something else.
  - VincentEvans 5y ago
    Yeah, that’s the rub, isn’t it. I would have asked the person you are replying to “what is that fabled institution?” (I still want to know though) - but the problem is two-fold: first, it’s not like I can just take my mortgage with me and change banks, and second, the banks seem to change hands, or they sell mortgages to other banks. So even if you do your due-diligence, (which I did I assure you, there was a reason I went with that bank, since it had a relationship with my employer and offered preferential rates), over last X years the bank went under new management and situation changed dramatically :(
vageli 5y ago
I have used the bill pay feature of my bank to mail a physical check to the mortgage lender with "Principal payment" in the memo field.
kakuri 5y ago
Sounds like you have had the misfortune of using terrible banks. I have never had this issue with home mortgages or car loans, it was always easy to make extra payments directly to the principal.
- jjeaff 5y ago
  I use a regional bank and they have always been a bit behind when it comes to tech. But even a decade ago, I could make my payment online and there was a simple checkbox to send extra payments toward the principal.
giorgioz 5y ago
An interesting thing I heard is that is not so convenient to pay off the mortgage earlier. Mortgages are debt with 1-3% per year. You could take the money you already have and put it in an ETF covering the whole market which kept for a long time (10 years) in average will return you 5-8% per year. I also had the instinct of paying off the mortgage faster if I could until they explained me that. Never had chance to do it. I'm interested in hearing some expert opinion about it!
- arcticbull 5y ago
  Or even throw it in a Series I risk-free savings bond paying 8%. [edit] I'm not an expert but explained why I wouldn't do that personally in a peer to your reply.
  - giorgioz 5y ago
    Your comment, though sarcastic, underlines some points I thought about myself and I would like to discuss it! We are both well aware that there is no risk-free investment. Governments bonds that are considered less risky that ETFs usually return 1-2% per year. The ETF I'm talking about maps a market index covering a big chunk of the US market or several stable international markets. They are still a risk, your house is also an asset and is also a risk. I think if you only have your mortgage as an asset then probably buying some ETFs would help diversify your assets. But if you already have a lot ETFs then maybe would be better to finish up earlier the mortgage...
    - arcticbull 5y ago
      Sorry if I came across that way, I wasn't being sarcastic at all. Series I bonds are essentially risk-free unless you think the US government plans to default within the next 1 year (which is basically the lock-up period). Series I bonds pay a coupon equal to CPI. The current Series I interest rate is 7.11%. It is variable, however, and capped at $10,000 in contributions per year (online). [1] [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
    - 5y ago
arcticbull 5y ago
> Have you ever heard how you could pay off your mortgage a lot quicker by making bi-weekly payments instead of monthly? Or how you can include extra with your payment and instruct your bank to apply it directly to the premium, helping you reduce your interest? Generally speaking you don't want to do that. A mortgage with an interest rate of like 3% (to which anyone in the last year refinanced or, or got on purchase - mine's 2.675%) is well below inflation. This means that having the loan is actually earning you money. When inflation is 8.5% and you're paying 3% interest on that loan, you're actually making 5.5% per annum by paying back the loan with future, inflated dollars. That's before you factor in the mortgage interest tax deduction, and opportunity cost. All in, not paying off your mortgage faster is likely earning you 6-7% per annum before you factor into account opportunity cost. On a Series I savings bond, that opportunity cost is like [edit] 7.11% [1]. Each time you pay into a Series I bond instead of paying off your mortgage you're earning about 15% per annum on that money vs paying off early. You want to keep your low-interest mortgage for as long as you possibly can, deduct the interest, and set aside anything you would have put towards early payments. If interest rates ever drop below what you're paying, refinance. Don't pay it off early unless your mortgage APR minus deductions is higher than inflation. [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
- mjmahone17 5y ago
  You don’t want to do this now, but there’s a reasonable world we end up in where either inflation hovers at 1%, like most the last 5 years (so you earn 2% by paying down a mortgage, vs -1% when putting it into a savings account), or interest rates stabilize at 10%, or both! Also some people just hate having debt, and so they want to pay down debts as quickly as possible. Even if it’s “irrational” their goal is to pay down their mortgage in the least amount of time. It is better for them to pay down principal than enqueue future payments.
  - VincentEvans 5y ago
    Answering both you and GP I belong to the “some people” group you described in your post. It’s not that I don’t understand the math, it’s just that I don’t have the mental capacity and time in my life to take advantage of this arbitrage. To illustrate - I have an acquaintance who transfers money between credit cards to take advantage of points, and sign-up offers etc. Were I to engage in such activity myself - assuming I know anything about myself at all, it is that I will 100% forget some detail or date and end up getting charged all of the delayed interest making me worse off than if I didn’t engage in such a scheme at all. So it’s like that. Rather than chasing some optimization in a half-ass manner, I’d rather just pay off the debt and pay less of my money to the bank.
giorgioz 5y ago
Can you name your bank please so to make it a negative review on their bad business practises?
- VincentEvans 5y ago
  It’s a credit union called Trumark. On a related note - it appears to me that credit unions are no longer what the conventional wisdom said they are either - a small community and customer-minded institution. In practice - I frequently see them being bought up or transferring management and resembling the national chains in how they operate more and more. Not sure what the difference is to be honest.
  - bombcar 5y ago
    Credit unions "legally" have to be owned by the customers, but this doesn't guarantee they'll be any good. Many of them decided "going online" was too hard, and outsourced all that stuff to providers. It can take some research to find a good local credit union that actually works well, and sometimes you have to accept the way they do things vs how you want to do things. Our local credit onion services AND holds 10 year mortgages, everything else they resell and service for awhile, but the servicing may get sold off, too. This can mean that even if you find a perfect bank to borrow from that changes shortly after you sign. Or you can switch some stuff to the massive brokerage houses, which all have associated banks and pretty decent staff/cost/features.
bombcar 5y ago
It all depends on who services your mortgage. In my case, the credit onion asked what to do with overpayments (because they also asked if I wanted to round up the payment to make it a whole dollar amount). Some banks aren't setup to handle this correctly, and do weird things with a bimonthly payment. They get a payment on the 1st, but it's not the full amount due, so they apply the entire payment to principle. Then they get another payment on the 15th, and since it's not the full amount due, they apply it to principle again, and then they complain that you didn't pay your mortgage, you point out they're dumb, and they have someone go torture the computer until the late fee is gone. And then this happens every single time and so the bank gives up and just applies all payments to "amounts due". Older banks are quite susceptible to this. You can solve this because the "lot quicker" isn't really because of early payments, it's because there are 12 months in a year but 26 biweekly payments, which means you make a 13th mortgage payment; so just do one principle payment or increase your monthly payment by 10% or so.
deleted 5y ago
[deleted]
melony 5y ago
Try this one https://news.ycombinator.com/item?id=30685921 https://news.ycombinator.com/item?id=30685921
- VincentEvans 5y ago
  Thank you for that! This seems to be exactly targeting the problem i described!
tclancy 5y ago
This got a lot harder with the rise of the Internet because what was fairly well-known became completely well-known so loaners started creating poison pill clauses to try to stop it. And then once they moved to electronic billing a lot of them came up with the hostile options you mention. The couple of times I have refinanced mortgages, I explicitly checked this when choosing between offers.
not_math 5y ago
At the bank I worked at, any payments made on the account that were above the due payment were applied directly on the account. But then you had people complain when they missed a payment because they put more money in the account to not miss the payment. You can't please everyone. Banking is hard because everyone is doing it differently, and everyone is doing it. So you have to please older people that are used to calling or speaking to a bank teller and also please the younger generation who want to do everything online and not deal with humans. The easiest way is to call when you want to do something the system is not expecting, because we had to manually adjust the final date of the loan, the amount due, and things like that. Terrible system and way more highly susceptible to human errors (trust me, I've seen a lot). There were also a lot of silos (different departments) to do specific tasks, so you would get transferred a lot until somebody knew exactly who could handle your case. Most people were new recruits from University working part time, so they didn't know enough to answer most questions and when they did they usually had their degree so they switched jobs.
anamax 5y ago
Bi-weekly payments isn't much different from making one extra payment each year, either by double-paying one month or paying 1/12 extra each month. I've had more than my share of mortgages and every one of them has had the equivalent of an "extra principal payment" line on both the on-line and off-line payment systems.

kemitche 5y ago

I am able to add additional premium payments to my payment, or as a separate payment, via my online mortgage payment site. It sounds like the bank/site your loan is under is actively hostile towards such payments. I don't know enough about mortgages to know how to help you solve your side, though.

lbotos 5y ago
The most sad part is, while I'm not OP, I had a bank that supported bi-weekly payments, my mortgage was sold, and the new bank doesn't. What a kick in the pants!
- arcticbull 5y ago
  They're saving you money by not supporting bi-weekly payments :)
  - lbotos 5y ago
    I assume you mean because the extra money that I'm putting into my house could make more money in the market so instead of a 13th payment, get gains in the market?
    - arcticbull 5y ago
      Well, as long as your (interest minus interest tax credit) rate is below inflation, youre better off putting that money in a 0% interest savings account than paying down the debt faster. Or consider 7% from a Series I bond, or investing it in something else.
- VincentEvans 5y ago
  Yeah, that’s the rub, isn’t it. I would have asked the person you are replying to “what is that fabled institution?” (I still want to know though) - but the problem is two-fold: first, it’s not like I can just take my mortgage with me and change banks, and second, the banks seem to change hands, or they sell mortgages to other banks. So even if you do your due-diligence, (which I did I assure you, there was a reason I went with that bank, since it had a relationship with my employer and offered preferential rates), over last X years the bank went under new management and situation changed dramatically :(

vageli 5y ago

I have used the bill pay feature of my bank to mail a physical check to the mortgage lender with "Principal payment" in the memo field.

kakuri 5y ago

Sounds like you have had the misfortune of using terrible banks. I have never had this issue with home mortgages or car loans, it was always easy to make extra payments directly to the principal.

jjeaff 5y ago
I use a regional bank and they have always been a bit behind when it comes to tech. But even a decade ago, I could make my payment online and there was a simple checkbox to send extra payments toward the principal.

giorgioz 5y ago

An interesting thing I heard is that is not so convenient to pay off the mortgage earlier. Mortgages are debt with 1-3% per year. You could take the money you already have and put it in an ETF covering the whole market which kept for a long time (10 years) in average will return you 5-8% per year. I also had the instinct of paying off the mortgage faster if I could until they explained me that. Never had chance to do it. I'm interested in hearing some expert opinion about it!

arcticbull 5y ago
Or even throw it in a Series I risk-free savings bond paying 8%. [edit] I'm not an expert but explained why I wouldn't do that personally in a peer to your reply.
- giorgioz 5y ago
  Your comment, though sarcastic, underlines some points I thought about myself and I would like to discuss it! We are both well aware that there is no risk-free investment. Governments bonds that are considered less risky that ETFs usually return 1-2% per year. The ETF I'm talking about maps a market index covering a big chunk of the US market or several stable international markets. They are still a risk, your house is also an asset and is also a risk. I think if you only have your mortgage as an asset then probably buying some ETFs would help diversify your assets. But if you already have a lot ETFs then maybe would be better to finish up earlier the mortgage...
  - arcticbull 5y ago
    Sorry if I came across that way, I wasn't being sarcastic at all. Series I bonds are essentially risk-free unless you think the US government plans to default within the next 1 year (which is basically the lock-up period). Series I bonds pay a coupon equal to CPI. The current Series I interest rate is 7.11%. It is variable, however, and capped at $10,000 in contributions per year (online). [1] [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
  - 5y ago

arcticbull 5y ago

> Have you ever heard how you could pay off your mortgage a lot quicker by making bi-weekly payments instead of monthly? Or how you can include extra with your payment and instruct your bank to apply it directly to the premium, helping you reduce your interest? Generally speaking you don't want to do that. A mortgage with an interest rate of like 3% (to which anyone in the last year refinanced or, or got on purchase - mine's 2.675%) is well below inflation. This means that having the loan is actually earning you money. When inflation is 8.5% and you're paying 3% interest on that loan, you're actually making 5.5% per annum by paying back the loan with future, inflated dollars. That's before you factor in the mortgage interest tax deduction, and opportunity cost. All in, not paying off your mortgage faster is likely earning you 6-7% per annum before you factor into account opportunity cost. On a Series I savings bond, that opportunity cost is like [edit] 7.11% [1]. Each time you pay into a Series I bond instead of paying off your mortgage you're earning about 15% per annum on that money vs paying off early. You want to keep your low-interest mortgage for as long as you possibly can, deduct the interest, and set aside anything you would have put towards early payments. If interest rates ever drop below what you're paying, refinance. Don't pay it off early unless your mortgage APR minus deductions is higher than inflation. [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...

mjmahone17 5y ago
You don’t want to do this now, but there’s a reasonable world we end up in where either inflation hovers at 1%, like most the last 5 years (so you earn 2% by paying down a mortgage, vs -1% when putting it into a savings account), or interest rates stabilize at 10%, or both! Also some people just hate having debt, and so they want to pay down debts as quickly as possible. Even if it’s “irrational” their goal is to pay down their mortgage in the least amount of time. It is better for them to pay down principal than enqueue future payments.
- VincentEvans 5y ago
  Answering both you and GP I belong to the “some people” group you described in your post. It’s not that I don’t understand the math, it’s just that I don’t have the mental capacity and time in my life to take advantage of this arbitrage. To illustrate - I have an acquaintance who transfers money between credit cards to take advantage of points, and sign-up offers etc. Were I to engage in such activity myself - assuming I know anything about myself at all, it is that I will 100% forget some detail or date and end up getting charged all of the delayed interest making me worse off than if I didn’t engage in such a scheme at all. So it’s like that. Rather than chasing some optimization in a half-ass manner, I’d rather just pay off the debt and pay less of my money to the bank.

giorgioz 5y ago

Can you name your bank please so to make it a negative review on their bad business practises?

VincentEvans 5y ago
It’s a credit union called Trumark. On a related note - it appears to me that credit unions are no longer what the conventional wisdom said they are either - a small community and customer-minded institution. In practice - I frequently see them being bought up or transferring management and resembling the national chains in how they operate more and more. Not sure what the difference is to be honest.
- bombcar 5y ago
  Credit unions "legally" have to be owned by the customers, but this doesn't guarantee they'll be any good. Many of them decided "going online" was too hard, and outsourced all that stuff to providers. It can take some research to find a good local credit union that actually works well, and sometimes you have to accept the way they do things vs how you want to do things. Our local credit onion services AND holds 10 year mortgages, everything else they resell and service for awhile, but the servicing may get sold off, too. This can mean that even if you find a perfect bank to borrow from that changes shortly after you sign. Or you can switch some stuff to the massive brokerage houses, which all have associated banks and pretty decent staff/cost/features.

bombcar 5y ago

It all depends on who services your mortgage. In my case, the credit onion asked what to do with overpayments (because they also asked if I wanted to round up the payment to make it a whole dollar amount). Some banks aren't setup to handle this correctly, and do weird things with a bimonthly payment. They get a payment on the 1st, but it's not the full amount due, so they apply the entire payment to principle. Then they get another payment on the 15th, and since it's not the full amount due, they apply it to principle again, and then they complain that you didn't pay your mortgage, you point out they're dumb, and they have someone go torture the computer until the late fee is gone. And then this happens every single time and so the bank gives up and just applies all payments to "amounts due". Older banks are quite susceptible to this. You can solve this because the "lot quicker" isn't really because of early payments, it's because there are 12 months in a year but 26 biweekly payments, which means you make a 13th mortgage payment; so just do one principle payment or increase your monthly payment by 10% or so.

deleted 5y ago

[deleted]

melony 5y ago

Try this one https://news.ycombinator.com/item?id=30685921 https://news.ycombinator.com/item?id=30685921

VincentEvans 5y ago
Thank you for that! This seems to be exactly targeting the problem i described!

tclancy 5y ago

This got a lot harder with the rise of the Internet because what was fairly well-known became completely well-known so loaners started creating poison pill clauses to try to stop it. And then once they moved to electronic billing a lot of them came up with the hostile options you mention. The couple of times I have refinanced mortgages, I explicitly checked this when choosing between offers.

not_math 5y ago

At the bank I worked at, any payments made on the account that were above the due payment were applied directly on the account. But then you had people complain when they missed a payment because they put more money in the account to not miss the payment. You can't please everyone. Banking is hard because everyone is doing it differently, and everyone is doing it. So you have to please older people that are used to calling or speaking to a bank teller and also please the younger generation who want to do everything online and not deal with humans. The easiest way is to call when you want to do something the system is not expecting, because we had to manually adjust the final date of the loan, the amount due, and things like that. Terrible system and way more highly susceptible to human errors (trust me, I've seen a lot). There were also a lot of silos (different departments) to do specific tasks, so you would get transferred a lot until somebody knew exactly who could handle your case. Most people were new recruits from University working part time, so they didn't know enough to answer most questions and when they did they usually had their degree so they switched jobs.

anamax 5y ago

Bi-weekly payments isn't much different from making one extra payment each year, either by double-paying one month or paying 1/12 extra each month. I've had more than my share of mortgages and every one of them has had the equivalent of an "extra principal payment" line on both the on-line and off-line payment systems.