Tuesday, April 29

Are Bi-weekly Mortgage Payments a Good Thing??

Have you ever been offered by a mortgage company or bank to sign-up for bi-weekly mortgage payments? By signing up for the program they tell you that you can save years off of your mortgage and lots of money too? Sound familiar? I know that we get these types of letter from companies at least twice a year.

It is true that you would save money and can take a few years off of your mortgage by paying bi-weekly....but it will cost you a bit of money too! You see....in the finest print at the bottom of that letter....is that they will charge a bi-weekly fee and/or start-up fee to take your money from your bank account every two weeks. Why should you be charged for someone to take your money?? Does not make much sense does it??

Well, you can do this exact process yourself and for free!!! Unfortunately, you cannot just mail in 1/2 your mortgage payment every two weeks...as most mortgage companies do not allow partial payments. But you can go around it other ways....

1. You can just take your monthly payment divided by twelve and then add that amount to your monthly mortgage payment each month.
2. Or you can one extra payment a year towards the principal. This will save about 6-8 years off of your mortgage depending on the terms and length.

Just make sure to label the extra as a principal reduction...otherwise your mortgage company will just apply it to your loan regularly. A good idea is to write separate checks with specific instructions to your lender. This way there is no confusion as to where the money is to be applied.

You can figure out your savings by typing in your mortgage terms here. You may be pleasantly surprised by the savings!!


Anonymous said...

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Anonymous said...

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