Do NOT Use A Biweekly Mortgage Company

Do it Yourself and Save $500

There are several firms that offer to restructure your mortgage payments to mirror a Biweekly payment schedule without having to refinance. Such firms charge you anywhere from $135 to $500 or more, to set up this program.  Some other firms will charge you a fee of 1% of your savings. All of these firms also charge a $2.50 to $12.50 “transaction” fee with each payment! These firms will electronically take your payment out of your checking account every two weeks. They will then send it to another bank to be held in escrow, then on the due date, send the payment to your mortgage holder.

First of all, there is no reason to pay all of those fees when you can VERY simply do it yourself. One firm says (for $395 and a $2.50 transaction fee per bank draft) they will give you a lifetime audit of your mortgage. With your own amortization schedule, you will be able to do your own audit. Why not take the $395 you save up front by doing it yourself and apply that to your mortgage? Making a $395 one-time payment at the start of your mortgage (using our example earlier) will save you over $1,900 in interest and cut 1 month off your mortgage!

Second of all, would you trust one of these firms to access your checking account, then trust them to make your mortgage payment? Makes me a little nervous. Also the fact that some of these firms have gone bankrupt and out of business is a little unsettling.

There are now some banks that will “convert” your existing monthly mortgage into biweekly mortgage, for a fee of course (usually around $400). Do they really convert your mortgage? The answer is no. What they do is charge you the up front fee, then they will debit your checking account half of your monthly payment every two weeks. What they are doing is getting free use of your money for two weeks until they make your monthly payment to the holder of your mortgage. They certainly not paying YOU interest on that money. Remember most banks that originate fixed rate mortgages, sell them to Fannie Mae so the bank cannot change the loan terms. The bank you are sending your payments to probably doesn’t own it anymore (Fannie Mae does). The bank is just “servicing” the loan (collecting the payments for Fannie Mae). So the bank debits your account (for half the monthly payment) every two weeks and holds the money until they have collected the full monthly payment, then they send it on to Fannie Mae. When the bank has accumulated more than the monthly payment, then the “extra” payments would be applied to the outstanding mortgage balance as a prepayment.

We will now show you how to save money on those outrageous fees.

How to “convert” your mortgage to a Biweekly Mortgage Loan

PLAN 6: “CONVERTING” YOUR MORTGAGE TO A BIWEEKLY

You can “convert” your existing mortgage to a Biweekly mortgage at anytime without refinancing by using the following method. Take your monthly payment and divide that by 12. In our example ($250,000 6% 30 year) that would be $124.61 ($1,498.88 / 12 = $124.61) add this amount to the $1,498.88 for a total monthly payment of $1,623.79. By doing this you will cut 24 years and 7 month off the mortgage and save over $61,200 in interest. This is the same prepayment method as the example titled “Equal Dollar Amount Prepayment.”

Some of you may be asking why can’t you just split your current payment in half and send it to the bank? The reason is because your original agreement states that your payments are made once a month and you are unable to change those terms. If you send in a half payment, the bank will simply hold on to that money, and consider it an incomplete payment. When you send the other half of the payment at the end of the month, the bank will then combine it with your earlier payment and THEN sends it to the mortgage holder. You will not receive any benefit by paying your mortgage like this, but I can guarantee that you will confuse the bank