Philadelphia Weekly

REAL ESTATE

Will payments every 3 weeks pay off a mortgage earlier?

Comparing simple interest to a standard loan

By Inman News Feed

Add Comment | Comments: 0 | Posted Oct. 8, 2012

11,059

$117,160

Payment Every 21 Days

5,229

$49,183

Can a monthly accrual mortgager be converted to a SIM so as to accommodate the three-week payment scheme? Some lenders in the past have converted mortgages to SIMs without the borrower's knowledge, where the note permitted it, as a way of extracting more interest from them. I doubt that any lender would be interested in converting to accommodate a borrower who wanted to use the SIM to cut his interest bill. But hey, it doesn't cost anything to ask.

The broader question is whether the SIM should be available to every borrower as an option, with full disclosure of the potential pitfalls and benefits.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.