Question

Something I’ve been thinking about for a couple of weeks now, does it make sense to hold your monthly mortgage into an easily transferable high yield savings account to collect interest, then transfer to a checking account to pay the mortgage? For instance, on a 4K a month mortgage @ 2%, that would equate to ~80 a year or 6. 67 a month. I’d like to hear your thoughts on this idea.  

Answer 1

If you have a $4, 000/month mortgage you’re probably not worried about $7  

Comments

@spencer8887 IMO the wrong mindset to have. Every penny is worth something. Compounding this over 40 years really adds up.  

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@spencer8887 I would disagree with that. I live in Chicago, and while my mortgage isn’t $4, 000, the cost of living is exceptionally high here. I pay about $2300 month for my mortgage and escrow for property taxes and homeowners insurance. Taxes have doubled in the 5 years since we purchased our home, which is out of our control and has been very challenging.  

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@koball @angelicaangelico46 let me rephrase - you’re probably not worried about $7 for the effort. If the money was just sitting there, by all means you want to get every penny you can. But to do all the transfers each month; there are better ways to make money  But of course, if you don’t think the effort is that big of a deal, then by all means do it!  

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@spencer8887 obviously $7 isn’t $700, but if you saw $7 laying on the ground, would you walk by it or pick it up? “Free money” is free money haha

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@koball if I was walking by it, picking it up would be a lot easier then transferring money back and forth every month. Plus it’d be more like $5 after taxes. Personally my checking account pays 3% interest, so the money would already be there and automatically earning interest. So that’s what you should look for to capitalize on cash you sit on every month.  

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@koball are you keeping a mortgage 40 years?  

Answer 2

Sounds like a pain just to get less than a McDonald's meal a month

Comments

@cube I have Simple which has a 1. 9% yield I think right now. It would be as easy as putting the money in the savings account and transferring it out of savings. Not a huge pain IMO.  

Answer 3

If you can automate it sure, but remember thats $80 a year before taxes because you'll be paying taxes on the interest. If you can't automate it and you have a 4k/month mortgage, the time/brain power to remember to do it monthly may be better spent doing something else that makes you money. At certain income levels, it is far more about maximizing income production than reducing expenses. At very low income levels, and at very high income levels this is typically most true. Low income levels no matter how much you cut, you just don't have enough to start with. High income levels, penny pinching isn't worth the mental fatigue and time spent when you could maximize income.  

Comments

@vincenty very good points. Automation is a wonder it and of itself.  

Answer 4

$65 (after taxes) over 40 years is less than 1 monthly mortgage payment *before* compounding. So, for 40 years worth of manual entries, or 40*12=480 manual transfers and remembering to do that every month, is it worth it?  

Comments

@vincenty for me, I suppose I’m somewhat odd, and enjoy paying bills. So for the most part, I pay them manually other than maximizing auto pay discounts and what not.  

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If you are already manually paying everything, than adding one bank transfer in along that process isn't that big a deal. The only bills I manually pay are the ones I can't automate: Water utility, and mother in-law's portion of phone bill.  

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@koball seems inefficient when you could likely be saving more than $7 a month by automating your bills, but to each his own I suppose.  

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@koball if you enjoy it, cool. Personally I like having to not think about it, even though I do, too often.  

Answer 5

Juice does not feel worth the squeeze to me.  

Answer 6

You could look into a high yield checking account. They have hoops to jump through, but mine is paying 2. 5% currently. Can you find a way to pay directly from the savings account?  

Comments

@manamanacle441 can I ask where you have your checking account?  

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@highwayman64 my local credit union, eriefcu. There are others that you can find that don't require you to live in my area

Answer 7

Is the idea to hold your mortgage payment for an entire month in a high yield account before is due? If the time period is less than it’s less than 6. 67 a month.  

Answer 8

This can easily be done with a Fidelity Cash management account. The link below can give you all the details on it, but a quick summary. You keep your money in a money market fund. Any time you write a check, atm withdrawal, or ACH payment, Fidelity will sell enough funds to cover the expense. Your money is always invested and you won't have to worry about the six transactions a month limit with a savings account. Other ways we use this account is to pay our credit card balance in full every month while earning a bit of interest.  
https://www.bogleheads.org/forum/vi...66538

Answer 9

Automate everything. Personally, my mortgage is due shortly after the first of the month. It's automatically taken. I get one of my paychecks at the end of every month, so that money goes almost straight into the mortgage. I also pay the credit cards shortly after getting paid, there's just not a lot of time for the money to sit in the account. My buffer / EF is in an account getting 1. 7%. Your procedure might be different. Maximize and automate.