Very impressed with Equity Accelerator Program

[Scanner]

When we took out our mortgage, we did the Equity Accelerator Program, where if you have a mortgage of $1000/month, you do 2 $500 payments per month.

Getting the refinancing bug in me, I called Wells Fargo today to see what our balance and term left were.

We did a 20 year mortgage and have been paying 5 years exactly. We currently have 12.5 years left on our mortgage with nothing more than divvying up our payment into 2 halves.

I asked her to estimate if we refinanced now at a 10 year mortgage, what equity accelerating would do and she said, "Anywhere from 7 to 8.5 years is my best guess."

Our principal left is $116,500 (orginally had $162,000). . .but I admit we don't have money laying around to pay points so we would probably roll the cost into a new mortgage.

I don't know. . .I still think it would be good to refinance, get our piece of the bailout, ya know? but my wife is hesitant to raise our prinicipal. Still, owning our house by the time our oldest starts college might get her to agree.

What do you think? Someone good at running number help me? I know the calculators but when the amortization tables start getting in the middle, then I start to get lost.

Anyway, I definitely recommend anybody do the Equity Accelerator program. It's truly effortless.

[sweeps]

Scanner, are you sure it's 2 payments per month, or 1 payment per 2 weeks? There's a difference. You're essentially making a 13th payment in a year which means you're paying you're mortgage faster.

It's a great thing to do BUT you should not pay for the privilege to do this. Simply send in an extra mortgage payment for the year and it has the same result.

[Scanner]

Hmmm. I don't know actually. Maybe it's just what you say but I am pretty sure we don't pay.

Something tells me it's 2x/month because it comes out on the same days every month - the 5th and 23rd, I think.

BTW, my current mortgage is @ 6% fixed.

[Caoineag]

If its through Wells Fargo, Scanner isn't paying for the privilege, its a free service that bank offers. They actually have quite a few options that you can choose for payment acceleration.

[Scanner]

Well, I just checked and I am more confused.

Here are my payments since Dec 1, 2008

12/1/2008: $514.22
12/12/2008 $514.22
12/29/2008: $514.22
1/9/2009; $514.22
1/23/2009: $514.22
2/6/2009: $514.22
2/20/2009: $514.22
3/6/2009: $514.22
3/20/2009: $514.22

I guess it is every 2 weeks like you say but December 2008 it was 12 days at one point. But because there is 28 days in Feb. . .it does appear to come out on the same days. . .but maybe that's an illusion.

Maybe the system is "Whenever we can squeeze money out of the Scanners without pissing them off."

[simpletron]

that's every two weeks but holidays messed up some payments. the payment on the dec. 29, should have been paid on dec.26(day after christmas) and the one on dec. 1 should of been paid on nov. 28(day after thanksgiving). the payments are normally ever other friday.

edit:
at current interest rates, 10 year mortgage with biweekly payments would be roughly 9 years give or take a month.

[jimmyengland]

i have a feeling you have this all wrong. My mortgage co offered me a similar option on my mortgage.... they charge u a fee for this service and all they are doing (like others have said) is by breaking the payments down to every two weeks. Therefore over the year charge you one additional payment (52/2=26 payments 26/2 = 13) so 13 payments per yr as apposed to 12 montly payments. I even called US bank to see what the deal was and she explained it as i have above. and i said to her "y would i pay you to do this for me when i can just make the additonal payments myself" and she replied with "most people are not disciplined enough to do this themselves"

So do yourself a favor and get out of the program pay the extra payment and add what ever they charge u for doing this additionally to principal. Plus if u are serious about paying this off early by refinancing to a 10 yr loan paying off in 7 yrs are you even going to recoup the closing costs of the new loan if you are actively seeking to pay down your debt..... without specifics on how much it would cost to close and at what rate the new loan would be it is tough to say and would need more details...

[myrdale]

**I give several numbers below. They are rough estimates from memory, I didnt take the time to redo my amortization schedule for this post **

You have a 20 year mortgage. You have been paying on it for 5 years. You have 12.5 years remaining on mortgage. You have effectively knocked 2.5 years off.

From my limited knowledge of the accelerate pay, you end up as they said making 1 extra payment a year. Basically over the past 5 years you have made 5 extra payments. You would have to make an amorization table to check exactly, but just roughly you will knock 3 or 4 months off of a loan for each extra payment (that is a rough estimate and depends on where you are in the loan). But ya those numbers jive.

Personally, I would perfer the monthly payment schedule, myself. As your doing now, you have twice as many checks to write, letters to mail, chances for things to get lost or screwed up or turned in late.

I would not pay extra for this "service" however. You can accomplish the exact same thing simiply by paying extra on principle each month.

Here is my example of achieving the same thing. I have a 30 year mortgage at 6.5% myself. My monthly payment is around $800. About $200 of that is tax and insurance, so the house payment is really $600 per month.

I budget between $1200 and $1500 each month for the house payment. In effect I am making double payments. Right now, after only two years I have knocked a 30 year mortgage at 6.5% down too a 20 year mortgage at 4.2% (That is IF I started paying only the standard $800 / month from here on out). If I continue paying extra this should be a 7 year loan at the most.

Even though rates may be in the 4.5 to 5.5 range, there is no reason other than a lower monthly payment for me to refinance. And if I do refinance I'd have closing cost, plus I would have to start over on attacking the interest on the loan. If I made the regular payments, it will cost more for me to refinance in the long run.

There is alot of power in paying extra principle on your debts. Ever spare penny you can find to put on the mortgage will pay itself back. For the $100,000 mortgage I would pay $150,000 interest over 30 years. By the time I have the house paid off in 7 years that number will be more closer to $20,000.

Keep up hammering away, and you will have it paid off in no time flat!!

[creditcardfree]

Do you know how much your closing cost would be? Have you been quoted an interest rate?

Scanner, I like your idea: refinance at 10 years and continue with the twice monthly payments...assuming no fee.

With less interest, your payments might be similar, but a shorter term and acceleration your money money gets more bang for its buck. Of course, it would be nice if we could see a calculator to back this theory up.

[poundwise]

Re: Accelerator Program

From the posts in this thread, it sounds like your bank does not charge anything and simply has you set up on an every two weeks payment arrangement. I don't see any problem at all with that.

Even so, people who read this thread need to be aware that most banks and mortgage companies charge for their so-called 'mortgage accelerator' programs; some of which are highly convoluted.

I'm glad your experience has been positive.

[disneysteve]

Originally Posted by poundwise

From the posts in this thread, it sounds like your bank does not charge anything and simply has you set up on an every two weeks payment arrangement. I don't see any problem at all with that.

Even so, people who read this thread need to be aware that most banks and mortgage companies charge for their so-called 'mortgage accelerator' programs

I agree. Most banks charge for this. If Scanner's doesn't, that's great and it would be silly not to do this.

If your company does charge, all you need to do is pay an extra 1/12 payment toward principal each month. You'll accomplish the same thing and it won't cost you anything. So if your monthly payment is $900, send an extra $75/month in toward principal. In a year, you'll have paid $11,700 which amounts to 13 payments.

[sweeps]

As another poster pointed out, there is another con besides potentially being charged for the service. You are increasing the number of due dates from 12 to 26. That means there is a greater chance of missing a payment -- especially if you mail checks.

Again, I personally would not mess with it. It's easier to pay more than the minimum monthly payment (which I do), or send in a 13th payment in a year to be applied just to principal.

[Scanner]

It's autodebited. . .so missed payments aren't a problem. Neither is postage.

The loan has been bought and sold many times. I think Washington Mutual was the first co. and now Wells Fargo owns our mortgage. I want to say someone else owned in there too.

I am 80% certain it was free to enroll and I imagine the terms have to carry with it as banks buy up mortgages. I should call to make sure but really, what cost is there if it is autodebited? (I think that was the stipulation upon enrollment)

I don't know what to figure in on closing costs to refinance - I always use 1% as a rough guideline (with 0 points). I would think adding $1100 to our prinicipal and knocking down the payment time to 8.5 years would be worth it.

Our monthly payment would rise tho. . .I wouldn't be doing this if the 4.25% interest rate wasn't dangling out there, like a juicy piece of marinated steak (I don't eat carrots).

[Caoineag]

[quote=disneysteve;214742]I agree. Most banks charge for this. If Scanner's doesn't, that's great and it would be silly not to do this.
...QUOTE]


I have Wells Fargo for my loan as well which is why I know they do not charge for any of the auto debited options. The one reason I don't do that option is because I am paid twice per month. That could get real awkward at the wrong moment. That and all my extra money is going towards higher cost debt and then into retirement accounts.

On the other hand, I love all the auto debited options. I do mine on the 1st every month but they even have weekly payments for those who want to do that. Choices are nice.

[disneysteve]

Originally Posted by Caoineag

I have Wells Fargo for my loan as well which is why I know they do not charge for any of the auto debited options. The one reason I don't do that option is because I am paid twice per month. That could get real awkward at the wrong moment.

Sorry. I should have said it is silly not to do if you want to make the extra payments anyway. There are certainly reasons not to do it if you either can't afford the extra payments or are directing your spare money toward other goals.

[MonkeyMama]

In general, these things cost you one way or another - whether it is obvious or not.

Which leads me to another reason to not do it. How easy is it to get out of? When you send extra payments you can stop at any time. I honestly don't know how easy it is to get out of one of these things, in comparison. Or if there are fees to change back to "once a month payments"? etc.

Just curious anyway. I personally find it far simpler to send in extra payments, monthly. The "every 2 weeks" thing would just drive me bonkers since everything else is monthly (our bills and income).

[disneysteve]

Originally Posted by MonkeyMama

How easy is it to get out of? When you send extra payments you can stop at any time. I honestly don't know how easy it is to get out of one of these things, in comparison. Or if there are fees to change back to "once a month payments"? etc.

That's a good point. Hadn't thought of that.

[Caoineag]

Actually you can switch the plan anytime, they are extremely lenient about that. I would imagine the reason it is a free "service" is that it saves them money to have you on the auto debit. That and it makes them look good in comparison to other mortgage companies.

PS. Oh and Steve, I wasn't offended, just figured I should put out the scenario why you wouldn't which applies to me.

[I_was Suckered]

I was scammed into the Wells Fargo Mortgage Equity Accelerator program. I thought it was a great idea at the time and thought I researched enough about the program before I bought into it, but I was wrong. After I paid their enrollment fee I participated in the program where they collect your payment twice a month. I was under the understanding that Equity Accelerator would make the payment to the mortgage twice per month, thus reducing my loan quicker because the payments were technically being applied up to half a month earlier. Wrong! Equity Accelerator collected my money twice a month but sat on it and collected the interest until the monthly due date was due. By hanging on to my money as well as the money of several thousand dollars from other participants they are able to collect any interest compounded during they time they sit on it.

[BuckyBadger]

Originally Posted by I_was Suckered

I was scammed into the Wells Fargo Mortgage Equity Accelerator program. I thought it was a great idea at the time and thought I researched enough about the program before I bought into it, but I was wrong. After I paid their enrollment fee I participated in the program where they collect your payment twice a month. I was under the understanding that Equity Accelerator would make the payment to the mortgage twice per month, thus reducing my loan quicker because the payments were technically being applied up to half a month earlier. Wrong! Equity Accelerator collected my money twice a month but sat on it and collected the interest until the monthly due date was due. By hanging on to my money as well as the money of several thousand dollars from other participants they are able to collect any interest compounded during they time they sit on it.

Are you sure that you were paying twice a month and not every two weeks? (24 payments as opposed to 26 payments.)

The greatest benefit of the biweekly payment scheme is NOT the interest during the first half of the month, it's the fact that you are paying an entire extra payment toward the principle.

I think you may be misunderstanding.

Additionally, I think that most pf the every-two-week-payment plans sit on the first check for two weeks. I think that is the norm.