Mortgage brokers enjoy giving potential borrowers tips on speedier repayment. The typical line goes like this: “If you only switch to bi-weekly payments, it’ll cost you about as much as an extra latte per week, [I believe the latte is a standard unit among bankers] and you’ll clear your debt five years earlier.” Needless to say, they don’t tell you this so you’ll get out of debt faster, but because it’ll make you more likely to get the mortgage. How so? They know you’ll do the following math, just far enough below full awareness to prevent your spying the trap.
25 yr mortgage / 5 yrs = 20% of the mortgage
5 yrs = 1 coffee/wk
So
1 coffee/wk = 20% of the mortgage
and
5 coffees/wk = 100% of the mortgage
Therefore, I can pay off my whole mortgage in zero years, and it’ll cost about $12.50 a week.
Well, where do I sign?