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PSA: biweekly mortgage plans
Since our refi is complete, I've been looking into bi-weekly mortgage plans to build equity faster and pay less interest on our loan. I was surprised that our new lender doesn't offer the option directly, but they accept payments from third-party companies that offer bi-weekly payment plans.
But the third-party companies all charge set-up fees ($170 - $250) and withdrawal fees ($2.95 - $3.50 per transaction).
FYI, your mortgage company can only accept 12 payments a year; if you send a partial payment, it will be returned to you. A third-party bi-weekly payment program charges you to hold onto your money, it continues making 11 regular payments to your lender, then it makes a 12th payment of double your monthly mortgage amount.
All the bi-weekly plans have you do is contribute enough to make additional payment on your loan principal, equal to a month's mortgage payment. It's basic math, and you can do the same thing on your own (and not risk the program going out-of-business and missing a payment to your lender): 12 months translates into 52 weeks, or 26 bi-weekly periods (not 24, since the number of days in a month varies).
So if you can afford to make a 13th mortgage payment in a year, simply do it yourself. Either double one of your monthly payments each year or divide your monthly payment by 12, then add that amount on top of your mortgage payment each month. Either way, you get that 13th annual payment in to build equity faster and pay less interest.
Just thought I'd share, because if you all are like me, you'd hate to pay for something you could do yourself for free.
Re: PSA: biweekly mortgage plans
I dont think this is true for every mortgage company. Maybe if you have an early buyout fee or something but I know a few people who make extra payments or principal only payments. We were told that with Chase (the bank we are trying to get a mortgage through :crosses fingers:) that any extra payments will be applied to principal.
We pay an extra every month and it really adds up towards decreasing our principal. It is fun to sit down every once and a while and figure out how much earlier we are paying it off. We have CitiMortgage (they bought ours a month after settlement) and they charge over $300 to set up the bi-weekly payments. So after doing research we concluded the same thing you did. I think right now we have our 15-year down to 12 or 13-years.
Now we want to get rid of escrow since they majorly screwed up paying our taxes and they want to charge us for that! DH was so made over the whole tax fiasco he wanted to re-fi but we would not have saved any money with the re-fi (just a bunch of paperwork to stick it Citi and they could end up buying it back anyhow).
Has anyone used a credit union for their mortgage? I think we will use PSECU for our next house.
Maybe that's the case with some lenders, but legal & acccounting reasons prohibit many from accepting partial payments.
You can almost always (except for some of the funny mortgages that were written in the past few years) add on to a regular payment, however, and put all the extra toward principal. That's what we're doing -- Pay more each month.
It boils down to knowing all your terms up front and before you sign. I had attempted to do the bi-weekly payments on my own by just paying a set amount every other weeks. The mortgage we have... like # 4 through all the freakin' buy-outs, will hold the partial payment and not credit it until we received the other half. Now, you can set up and auto withdraw bi-weekly and they can do that with no fee but we didn't want to do that, so to pay more you just have to designate the extra as principle or it will get banked into your escrow account.
So compnaies also have a pre-payment fee so if you do pay $ early you will be penalized., Some will give you allowances by also having them as a bank. Like with ours, if we used thei bank for our checking we could pay our Mtg on their website, since we don't use their bacnk, there would be a $10 charge.
Just as various banks/mortgage compnaies offer different productions or types of loans, they also offer difference conditions. It's up to you as the buyer/consumer to ask questions as read the fine print. And if something looks off, call them on it. Loan amounts, insurance rates, interest rates, terms... they can all end up differnt than what you have other paperwork saying it should be. worked for a mortgage company in the past and the mistakes you find are unbelievable. it behooves you to read up and come armed with as much info as possible and know What you are getting into and your terms before agreeing to sign.