Bi-Weekly Payment Program for Home Mortgages?

[prontospyder]

Any Homeowners here who is on a bi-weekly payment program? Does it really cut 7-9 years from a 30 year mortgage? Did you guys arrange it with the bank or a 3rd party?

I got an offer from a 3rd party asking for a $195 application fee and $2.95 fee per payment thereafter. Is that a good deal?

Thanks.

 

[Pliablemoose]

The reason it cuts the term of your note is because you're essentially making 1 extra payment per year, just write a couple of extra checks per year towards the principal of your mortgage & you'll achieve the same effect without paying someone for the privilege.

It works for some people, but you can achieve the same effect without tying yourself down to a biweekly payment.

 

[woodie1]

<< Any Homeowners here who is on a bi-weekly payment program? Does it really cut 7-9 years from a 30 year mortgage? Did you guys arrange it with the bank or a 3rd party?

I got an offer from a 3rd party asking for a $195 application fee and $2.95 fee per payment thereafter. Is that a good deal?

Thanks. >>



There is no reason to pay a third party to do that. If there are no prepayment penalties on your mortgage just add $100 or $200 or whatever to your normal mortgage payment each month. Make sure your extra payment is earmarked to apply against your principal.

 

[Thrillhou]

The bi-weekly payment programs are just a scheme to get you to pay the application fee. Like the previous post says if you add an extra payment each year you will accomplish the same thing without the obligation for the extra payment.

 

[prontospyder]

Thanks for the suggestions. Hopefully, I have enough discipline to pay alittle extra each month.

 

[kranky]

The above posters are correct - you don't need anyone to "help" with doing this. Just to explain a little more, in a calendar year there are 26 biweekly periods, but 12 months. So if you pay one-half of your payment every two weeks, you'll be making 13 payments over the course of the year. Add 1/12 more to your payment every month and you will accomplish exactly what that program claims to do but without paying anyone else to do it. They make money because they collect from you every two weeks, but only send in the payment every month - so for half the month they are making interest on your money they are just holding.

Plus, if you do it on your own you can adjust the extra payment up or down as your circumstances might dictate.

On a related note the biggest savings for prepaying on your mortgage is during the early years, so try like hell to do it early.

 

[prontospyder]

Great explanation guys.....looks like i'll make $120 extra in payments per month.