Bi Weekly Mortgage Payments

[GG Allin]

I just enrolled in one. My current mortgage is actually brand new. It's a 20 year fixed at 5%. I haven't even made my first payment. When it's all said and done I will pay the loan off in 16 years 8 months. I paid a $245 enrollment fee and will pay a $3.50 monthly service fee. That's $945 in fees over almost 17 years. The interest saved over that time will be $19057. The company providing the service is National Biweekly Administration. Seems like a good deal. When I'm 56 my house will be paid for. This appeals to me. Anyone else enrolled in one of these, or familiar with it? Any thing I'm not seeing before it's too late?

[Gogar]

You can accomplish the same thing in the same timeframe by:

Saving and paying 1 extra payment per year, or

overpaying by about 8-10% of your payment amount each month.


But, if you just want it to be automatic and not ever have to worry, and it's worth $945 to you, then why not?

[legion]

Don't do it!

First of all, you can do it on your own without paying any fees. Even if your bank disallows partial pre-payment (and some do), you can put the money in a savings account for 15 days every month. Those fees are simply eating money that could go to equity.

Second, and more importantly, your grace period goes from a 15-day grace period once a month to a 5-day grace period twice a month. It's a lot easier for me to make one bulk mortgage payment sometime during those 15 days because I know I will get paid every 14 days. With this new program, you can literally get hit with late fees TWICE a month instead of once. If you get behind, you will have double the number of late fees piled on, and they happen much more quickly.

[GG Allin]

Originally Posted by Gogar

You can accomplish the same thing in the same timeframe by:

Saving and paying 1 extra payment per year, or

overpaying by about 8-10% of your payment amount each month.


But, if you just want it to be automatic and not ever have to worry, and it's worth $945 to you, then why not?

I might actually do that too. Perhaps a principal payment at tax return time.

[Christien]

We do weekly mortgage payments. No service charge or enrollment fee - never heard of such a thing, actually, and if there was, I'd think that'd be an easy thing to bargain away through a mortgage broker. The switch from monthly to weekly cut something like 5 years off our mortgage, yet is the exact same cash outlay per month. Hell, I'd pay daily, if I could!

[GG Allin]

Originally Posted by legion

Don't do it!

First of all, you can do it on your own without paying any fees. Even if your bank disallows partial pre-payment (and some do), you can put the money in a savings account for 15 days every month. Those fees are simply eating money that could go to equity.

Second, and more importantly, your grace period goes from a 15-day grace period once a month to a 5-day grace period twice a month. It's a lot easier for me to make one bulk mortgage payment sometime during those 15 days because I know I will get paid every 14 days. With this new program, you can literally get hit with late fees TWICE a month instead of once. If you get behind, you will have double the number of late fees piled on, and they happen much more quickly.

I thought about the issue of not having control of when the payment is made. I have overdraft protection on my checking and would just cover any debit from that with a transfer from my savings. I get paid weekly by the way.

[legion]

Originally Posted by Christien

We do weekly mortgage payments. No service charge or enrollment fee - never heard of such a thing, actually, and if there was, I'd think that'd be an easy thing to bargain away through a mortgage broker. The switch from monthly to weekly cut something like 5 years off our mortgage, yet is the exact same cash outlay per month. Hell, I'd pay daily, if I could!

It's not exactly the same, it's just the same most months.

If you were making 12 full payments under the monthly system, you are making 52 quarter payments under the weekly system. That works out to 13 full payments a year.

I pay monthly and just add an extra 15% or so to each payment. That works out to be almost two full extra payments a year.

[Chocaholic]

...and you also remove any possible flexibility you may need in future years. Why not just send an occasional principal-only payment as your finances allow? It seems silly to pay someone to allow you to send payments more frequently...especially since you're locked into the program if priorities change. And trust me....they do!

[legion]

Originally Posted by Chocaholic

...and you also remove any possible flexibility you may need in future years. Why not just send an occasional principal-only payment as your finances allow? It seems silly to pay someone to allow you to send payments more frequently...especially since you're locked into the program if priorities change. And trust me....they do!

Yep, the upside is that they charge you for the convenience of doing something you can do on your own, and the downside is less flexibility and more fees.

[Dave L]

Originally Posted by Christien

We do weekly mortgage payments. No service charge or enrollment fee - never heard of such a thing, actually, and if there was, I'd think that'd be an easy thing to bargain away through a mortgage broker. The switch from monthly to weekly cut something like 5 years off our mortgage, yet is the exact same cash outlay per month. Hell, I'd pay daily, if I could!

I do weekly as well but I wouldnt pay a fee for the privilege. I have also put down some pretty good chunks to reduce the principal. I should be done in my early 40's.

[Rick Lee]

Why would anyone pay for this?

Take your P&I payment, divide it by 12 and add that amount to your payment each month. That knocks seven years (84 payments) off the end of your loan.

[Dueller]

One suggestion...when you make an extra payment, specify it for "Principle only." Otherwise it will be applied to interest/escrow etc.

[Rich76_911s]

Mbrouder,

If you have any other debt I would pay that off before I made extra house payments. A 5% loan for 30 yrs is about as cheap as you'll ever be able to borrow. I doubt you do, but if you have any credit card debt, etc pay that off way before you pay down the mortgage.

Rich

[rnln]

If you do this, will the interest decrease (not the rate)? If not, why not just save the cash there and pay a one sum at the end if yuo want to?

Originally Posted by Dueller

One suggestion...when you make an extra payment, specify it for "Principle only." Otherwise it will be applied to interest/escrow etc.