Mortgage gurus....BiWeekly payments????

[Chew]

We got a letter from our mortgage company that is showing us how much interest we can save by switching to a biweekly plan and having the payment automatically deducted from our account.

It shows us saving 39K in interest and shaving off 7 years and 1 month from the term of our mortgage.

Are there any negative aspects to switching to biweekly payments?
Why would the mortgage company solicit us to do this if they will be losing 39K ?

Thanks!

[Bruiser]

Because they are going to charge you a fee to do it.

[Chew]

Good point Bruiser. I just looked at the letter and it costs $375 to sign up. If we truly save $39K, then that's a drop in the bucket. But I hate paying for anything like that!

They offered to break the $375 into equal installments of $25.

I'm just worrying about what happens to this plan and my $375 if the mortgage company decides to sell my mortgage to another company (which happens all the time).

Anyone?

[Roy D Mercer]

Dont pay the fee just make 1 extra payment a year, same thing.

[Roy D Mercer]

Or divide your payment by 12 and send the extra every month, same thing. Make sure you tell them it is for additional principal payment.

[jerp]

I think that making a few extra payments to principal every year would do the same thing, but without the fee. Sounds like they are trying to make more money off the responsible borrowers, to make up for the money they've lost from deadbeats and bad lending practices.

[Bullydog]

Dont pay the fee just make 1 extra payment a year, same thing.

Ditto...will cut about the same time and interest off your current loan...without the fee.

[TXJon]

Making bi-weekly payments is making one extra payment every year. 52/2 is 26 half payments, or 13 of your regular monthly payments.

Add 1/12 to pay down your principle every month and keep the $375. Usually with those programs they also want to suck the cash directly out of your checking account, no need for you to mail a check. I'd rather mail the check.

[Burnadell]

Chew, you should be able to make extra prepayments at anytime, just by sending larger payments; don't need to "enroll" to do it. Just be sure you keep copies of the checks and enclose a note with the extra payments with mortgage loan # etc, so they can identify where to apply it.
Yes, it will pay of your loan surprisingly earlier and save quite a bit of interest.

[Landrover]

Because they are going to charge you a fee to do it.

Yep, we get those letters about twice per year for the last 5 or so years.

They offered to break the $375 into equal installments of $25.
I'm just worrying about what happens to this plan and my $375 if the mortgage company decides to sell my mortgage to another company (which happens all the time).

Installments...wow they are digging deep big time. If your loan is sold the agreement stays in tack.

Dont pay the fee just make 1 extra payment a year, same thing.

Yep, but you gotta be focused! The banks know how many people aint gonna do it unless it happens automatically.

Chew, you should be able to make extra prepayments at anytime, just by sending larger payments; don't need to "enroll" to do it. Just be sure you keep copies of the checks and enclose a note with the extra payments with mortgage loan # etc, so they can identify where to apply it.
Yes, it will pay of your loan surprisingly earlier and save quite a bit of interest.

Yep that is the way to it. But the focus has gotta be there. Yes, it is a great thing to knock the years and interest off of those loans!

[bcdawg1]

What LR and the others have said is spot on. You can make the extra principle payments yourself anytime with no fees or program but you have to have the discipline to be able to do that. The first time things get a little short you will stop making the extra principle payment and your interest savings will decrease.

Personally, I am in one of the programs because I don't have the discipline to not use the extra principle payment elsewhere and two I hate writing and mailing checks so I love the biweekly autodraft option on the payment.

[Nova]

I have heard Dave Ramsey and others speak to this and they don't reccomend it for the reasons stated. Just make the extra payment.

[TENRMORE]

The power of compound interest...Most banks and credit unions offer on-line payments now and you can set it up to be every two weeks. Keep your money...

[Bill]

When banks sell the mortgage, your terms shouldn't change, you have a contract. Future things might. Call their 800#, ask for a supervisor, tell them your a good customer and on TBH, and you'd like them to waive the $375 fee. It's amazing what you can get in a negotiation if you just ask for it. Worst she can say is?

The advantage of setting it up, is it's out of sight and out of mine, and it happens every month.

[Chew]

tell them your a good customer and on TBH, and you'd like them to waive the $375 fee.

If they got on TBH and started reading, they would probably be afraid to do any further business with me.