Irregular Payments

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Not exactly breaking any news to those of you following the personal finance blog world, but HSBC has out of the blue decided to lop off a quarter percent on their HSBC Direct savings accounts. Mind you, the email I just received from them didn’t mention that fact, just that their summer high-rate promotion had come to an end (hmmm, I don’t recall a notice that their high-rate promotion had begun), but that the rate is still .2% above the rate they were offering before the promotion.

Oh, and that they were now offering the incredible rate of 3.75% on a CD…

Which just reminded me that I want out of HSBC-land. I only log into the account once or twice a month, either to deposit my monthly non-monthly bills money (ala something like 1/12th of our property taxes or 1/6th of our car insurance payment) or, if when it becomes time to pay one of those irregular bills, to withdraw what was set aside. And each and every time, I’m annoyed by their login process. On two occasions now, I’ve had to waste my time calling them up and plead to let me back into my account after screwing up the login a few times in a row.

If I truly value my time, just one call to restore my account after a login foul up will easily kills a few years in extra interest beyond what I can get elsewhere. It’s just not worth it to trade that five bucks or so a year extra my irregular bill fund earns at HSBC with the simplicity that is ING Direct (where I keep my side business money partitioned away from our ‘regular’ money).

So I just opened another sub account at ING, and in a few days, I can remove one more bank from my Financial Institutions I Have Accounts With list.

Back in March the ol’ home PC decided that it was time to give up the ghost. And, debt-or-no-debt, doing without wasn’t really an option. But I certainly didn’t want to empty a savings account or, worse yet, throw it on a credit card.

As I mentioned at least once before, I do a bit of computer tech work, so I was pretty comfortable deciding what was needed and what was not. Just in case you are in the same boat as I was, here’s a few money saving tips on buying that new PC:

• Never buy a top of the line computer. That is, unless you really enjoy paying double what the same system will set you back in six months.
• Most preconfigured systems come with marginally adequate amount of memory at best. There are ways to go cheap on a computer; this is not one of them. Memory is by far the cheapest bang for buck. Get at least one gigabyte of it.
• Unless you are a hardcore DVD or music pirate, a 300 gigabyte hard drive is overkill. Oh, and good luck backing that all up!
• If buying a Dell/Gateway/HP/Compaq/etc. pre-configured system, choose a “without antivirus” option if possible. You can get excellent antivirus protection with the free version of AVG. As a plus, you won’t have to suffer with the spectacular piece of junk that is Norton Antivirus.
• The big money saver? For most people, the bloat that is Microsoft Office just isn’t necessary. There are many, many alternatives that do the job of almost any MS app just as well, if not better, for the much more reasonable cost of zero.
  • For word processing and spreadsheets, OpenOffice is wonderful. As is Google Docs. Or for that matter, ThinkFree. Or WriteBoard. Or EditGrid. Or Zoho. Or… well, you get the point. Let’s just say, there’s a few options.
  • What about email? You’ll have to pry my Gmail account from my cold dead hands. (And if you feel like really integrating what Google offers, Google Apps is really pretty painless to set up.) Yahoo Mail. Or even Hotmail. On the other hand, if a desktop application is your thing, Thunderbird might be your thing.
  • Calendaring? Google Calendar. 30 Boxes. Remember The Milk. Kiko. Yahoo Calendar. Again, lots of options — and seemingly more every few days!
  • PowerPoint? Just say no. Ok, if you must: Empressr. Or Spresent. Or Zoho Show. But really, best yet:
    Just Say No! One more wasted hour sitting through another poorly thought out PowerPoint meeting (which is almost every one) that could have been taken care of more effectively with a simple handout and I may flip out…

Using those tidbits of knowledge, I easily knocked $200+ off an already ridiculously cheap system, and am happier with the end product to boot!

With this month’s mortgage bill, we also received an offer to join our lender’s Accelerated Mortgage Payment Plan. Using it, they claim we can settle our 30-year mortgage seven years early while saving a sizable amount in interest payments. And indeed it would, as we would be paying half our payment bi-weekly - instead of once monthly like now - which is 13 full payments a year (52 weeks bi-weekly equals 26 half payments equals 13 full payments) instead of the normal twelve. That one extra full principal payment does wonders, especially early on when almost everything you pay is eaten up by interest. A little pain up front yields incredible returns later. (That is, if you consider not having a mortgage payment incredible returns. I, for one, do even though I know there are those of you out there who do so love that mortgage interest deduction.)

So sign us up… Oh, wait, better check that fine print:

• Enrollment in the program: $49.99.
• $4.50 per bi-weekly payment - which averages out to $9.75 a month. Because, as you know, automatic payments are so expensive to set up, so they’re helping us out by spreading that cost over the life of the loan…
• Payment held in escrow until the standard payment is due - in other words, at the end of the month - instead of when the bi-weekly payment is actually submitted. Not that it would be an immense difference, but I’d certainly appreciate the few cents of interest being avoided if those mid-month payments were applied immediately rather than a little more interest going into the bank coffers. And, you can be sure the bank is doing something with those funds over the escrow period.

Is it still worth it? Well, by my calculations, for our little bitty house loan we’d save $8,800 in interest at a non-adjusted cost of $2,740 in program costs. Saves us $6,060 when everything’s paid off. So far so good.

Take those same program costs, and drop them in a very conservative investment like our HSBC savings account at 5.05%, and at the end of those 23 years we’d have future value of $5,244. Enrolling still saves us $3,556.

But, the kicker is, there’s absolutely no point in enrolling in their plan at all, especially the way they have it set up. Nothing at all is stopping us from applying an extra half payment twice a year. Same $8,800 savings, just without costing us that $5,244 in program costs. And then, if we’d instead apply that extra $9.50 a month we’d have paid for the program to the loan, we end up knocking off an additional two years, plus the already mentioned seven, on the term of the loan, and save an additional $3,100+ in interest payments.

I think we’re going to have to pass on this offer…

Tagged:
 » mortgage, payments, accelerated payments, interest