MortgagesUndressed

I am going to describe the components of the bi-weekly mortgage plans I have seen over the years.

Concept:

Your bank account is automatically charged 1/2 a payment every two weeks. This will provide the funds for an extra payment.

The following are components have and do cause me to tell people to not enroll in these programs.

1- You pay a fee to enroll in this type of service.

2- You have a company holding your money in an account.

3- This company, not you, makes your mortgage payment.

4- You earn no interest on your money they are holding in trust.

5- You are charged a monthly fee for this service.

Sorry, this never made sense to me.

These are my two alternate recommendations. They do require you do a little work, not much really.

1- If you are married or own the home with another person, make an extra principle payment equal to 1/2 of your mortgage payment on each persons birthday.(Pretty good birthday gift I would say.)

2- Have your lender provide you an amortization chart with your mortgage components: years of amortizing, interest rate, monthly payment principle amount, and monthly payment interest amount. Each month, write two checks to your lender; a check for the normal payment and a check that is the amount of interest for the next payment. In the early years of the mortgage this second check will be a very small amount. Write the notation on the check, extra principal payment. Save these checks. Keep the chart, check off each payment you make. When you pay off the mortgage make sure the balance you have concurs with the final statement from the lender.

I personally like the second option. I think it gives great visibility to how fast you are cutting off a payment, how little it takes.

PS: After writing this I did a Google search on the topic. I note the following: There definitely are companies trying to sell this servicet. There are several other articles you can find explaining Bi-weekly in greater detail. Make it easy on yourself. Follow the advice in this article. Don’t do bi-weekly plans like these I describe.