Bi-weekly Mortgage??

[bjl584]

I received a letter from Citi (my mortgage provider) telling about information on their bi-weekly mortgage program. The letter said that it will save me thousands in interest over the life of the loan. Currently I pay once a month. In late 2004 I took out a 15 year fixed mortgage of 83,000. My current payment is 668 a month, and my remaining balance is around 62,000. Does anyone use a bi-weekly mortgage, and from the numbers that I gave, would it make any sense for me to start doing the same? Thanks.

[simpletron]

the reason why you save thousands in interest is because with bi-weekly payments you make 13 full payments a year instead of 12. you can get the same savings if you pay 1/12th(~$56) more per month. so I wouldn't pay extra for this service, but if it is free and you want to prepay on your mortgage or it makes budgeting easier, then go ahead and get it.

[momof1in150]

You can do this without setting it up with your bank. Your bank will most likely charge you a fee for something you can do for yourself for free. You can pay 1/2 your mortgage every two weeks. You need to make sure that you stay current with the 1st payment. For example, if your mortgage payment is $2000 a month and due of the 1st then you would pay the $2000 on 1st for the first month and then $1000 every two weeks from there on out. The other reason that I prefer to do it myself because if there are times that I need the cash for other reasons I can have it available.

[Gjowers]

My bank charges for this. I just make an extra principal payment each time I get paid. It costs me nothing and I get the same result.

[ZeroDebt]

bjl,
You will definitely benefit from paying bi-weekly or making an extra payment per year because you are still in the very early stages of your mortgage when the majority of your payment goes towards interest. By taking bites out of your principal with extra payments now, you are decreasing the amount of interest you can be charged and shortening the life of your loan.
I know of a very good calculator online...this is my first day posting so I hesitate to put it in this post. I don't want to break the rules on my first day! PM me and I'll be glad to share it with you.
Jenn

[ZeroDebt]

I should have added that everyone so far has been right...you don't need to refinance to do this. You absolutely can do it on your own!

[Gjowers]

Go to Dinkytown.net and look for the extra mortgage payment calculator. That will be a big help to see the impact of extra payments on both the life of the loan and the interest you pay for it.

[ZeroDebt]

Thanks G...I was thinking of bankrate.com
But I just checked out dinkytown and I am loving it!
Thanks again!

[JinCO]

We pay our mortgage bi-weekly. Our bank does not charge a fee. We scheduled the payments to coincide with when we are paid which is also bi-weekly. I would recommend doing this if there is no fee for you.

[KatieNK]

if you pay extra each month, how do you ensure that it goes toward the principal and not the interest? If you just make a note on it, is that good enough?

[ZeroDebt]

That's a good question Katie...I know when I pay my Countrywide loan online, there actually is a box for me to input additional principal payment. My best recommendation, ask the lender.

[bjl584]

Originally Posted by KatieNK

if you pay extra each month, how do you ensure that it goes toward the principal and not the interest? If you just make a note on it, is that good enough?

There should be a line for it on your payment ticket

[feh]

Originally Posted by KatieNK

if you pay extra each month, how do you ensure that it goes toward the principal and not the interest? If you just make a note on it, is that good enough?

All payments are applied toward the principle. Interest is what's charged on your unpaid principle.

[jIM_Ohio]

You don't need to sign up for the program. As one person suggested, send 1/12 ($56) every month OR round your $668 payment up to $700 or $750 or $800 each month (I like round numbers).

One flaw with every other week is I get paid 2X per month, so that program discriminates against me. Any Lawyer want to take that case and win me and you some money? LOL.

[Snave]

Originally Posted by feh

All payments are applied toward the principle. Interest is what's charged on your unpaid principle.

This is not always the case. It seems like it ought to, but some banks have been known to not apply it at that time, but rather hold the additional funds for your next payment. Basically, they know you are trying to pay the mortgage down and they try to play stupid and say "we thought you wanted it applied to your next payment" therefore trying to screw you over. Just make sure it is going to the principal.

[KatieNK]

Originally Posted by Snave

This is not always the case. It seems like it ought to, but some banks have been known to not apply it at that time, but rather hold the additional funds for your next payment. Basically, they know you are trying to pay the mortgage down and they try to play stupid and say "we thought you wanted it applied to your next payment" therefore trying to screw you over. Just make sure it is going to the principal.

Exactly!


I have Countrywide too so I checked the website and I can select to pay towards the principal. I usually just pay through my bank's online bill pay so I didn't know if my bank had the option either on their site or through payment coupons (which I never had).

[puck36]

If you have WellsFargo, like I do, you do not pay for this. Plus I do make extra payments when I can.

[feh]

Originally Posted by KatieNK

Exactly!


I have Countrywide too so I checked the website and I can select to pay towards the principal. I usually just pay through my bank's online bill pay so I didn't know if my bank had the option either on their site or through payment coupons (which I never had).

Hmmm...there seems to be a lack of communication here. All payments are applied toward the principal - there isn't any other place to apply them. I understand banks may play games and apply it at a later date, but that's a different matter.

If I'm missing something, somebody please educate me.

[ZeroDebt]

Hmmm let me try again.

I'm sure you realize that every time you pay towards principal balance, the amount of your next (and future) monthly payment that goes towards principal increases because they have less principal to calculate interest on.

Well, by holding that money with the stupid excuse of "we thought you were paying towards your next payment" in effect they are applying it to interest because they are applying it to your next payment instead of reducing your principal balance, which they use to calculate the interest you owe for the next payment.

I find it so hard to verbalize this! Anyone else think of a good way to say it?

[maat55]

The key to paying extra is to add to your monthly payment. If you attempt to pay half byweekly, the mortgage company will misinterpret the allocation.

If you are paying online, they have certain days that are free transaction days. I just add to my monthly payment in the add to principle feature.