September 16th, 2016 4:48 PM by Elizabeth Washburn
Did You Know?
Making one extra mortgage payment a year will knock 5 - 7 years off your mortgage and save you thousands of dollars.
Click here to learn more.
If you do an internet search for "bi-weekly mortgage", you will be overwhelmed by the number of companies offering "Bi-weekly Mortgage Reduction Services" or "Bi-weekly Savings Programs." Beware, you are entering expensive waters!
These companies are charging you fees to basically mail a payment for you. The enticement is that they will save you an impressive amount of money on your mortgage and reduce the number of years you pay on your mortgage. And they will! There is no false advertising. The problem is you don't need to pay them to get those savings because I am about to tell you exactly how to do it yourself!
The real story is that they are not actually making bi-weekly payments on your mortgage. They are making bi-weekly deductions from your bank account. These funds are placed into an account from which your monthly mortgage payment is made (which only takes 24 deductions - but during the course of a year 26 deductions will be made from your account). With the extra 2 deductions, the "Service" makes one additional mortgage payment. In other words rather than making 12 mortgage payments, 13 payments are made.
The enticement is that they are providing a special service to you that would either not be possible for you to get on your own or that you won't have the time or discipline to make it happen.
The real story is that you do have the discipline and can easily make an additional mortgage payment each year. An easy way to do this - with no payment shock - is to deduct your mortgage payment automatically from your account each month with an additional 1/12 of your mortgage payment applied to the principal amount each month.
New Monthly Payment = (Monthly Payment + (Monthly Payment/12) .
At the end of 12 months, you will have made an additional mortgage payment and you won't have to pay any fees to a "Service". Now that just makes cents!