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Old 08-16-2011, 08:56 AM
 
Location: West Orange, NJ
12,542 posts, read 17,725,661 times
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So i have my mortgage with Fifth Third afer refinancing about a year ago. With Bank of America, I used to pay weekly, ever Friday, 1/4 of my mortgage payment. This accelerated my payoff date and reduces interest accrued. Fifth Third says they can do bi-monthly payments, but I have to pay a $250 enrollment fee and then $1.50 per payment.

Is this common? Is there any way around it? It's very frustrating that they take advantage of customers like this.
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Old 08-16-2011, 09:05 AM
 
Location: N. Raleigh
674 posts, read 1,279,818 times
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You could always throw an extra payment or two a year and get the same results without the extra fees.
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Old 08-16-2011, 09:06 AM
 
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Divide up how much extra you would pay on the principle by 12 and add it to your monthly payment each month to be applied to the principle. Or make an additional payment on the principle with the total amount that you would have paid by having this arrangement. This will accelerate your payoff and reduce the total interest you pay over the life of the loan.
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Old 08-16-2011, 09:22 AM
 
Location: Newton, MA
324 posts, read 897,967 times
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Quote:
Originally Posted by bradykp View Post

Is this common? Is there any way around it? It's very frustrating that they take advantage of customers like this.
I agree. I think it's an awful practice. It is pretty common, IME. If you can trust yourself to make one extra payment per year (send in the extra payment with a letter asking that it go towards paying down principle), there's no need to waste the 250 bucks.
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Old 08-16-2011, 10:15 AM
 
Location: southwest TN
8,175 posts, read 14,249,488 times
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When I looked for a mortgagor, one of my requirements was a plan to make monthly principal only payments without penalty. We started in month 2 and have been doing so automatically every month but we can stop and start again at any time.

However, what I believe OP is asking is to not make a FULL mortgage payment on the due date but to make a series of 4 payments totalling the whole mortgage payment paid partially in advance of the due date. I have no doubt the bank wants to charge extra. I understand the reasoning behind your wanting to do it, OP (cutting down a wee bit on the interest), but from the bank's pov, it does require extra bookkeeping (albeit done by computer) but it is an extra step for them (1 more data entry by a person).
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Old 08-16-2011, 11:27 AM
 
Location: Richardson, TX
10,116 posts, read 16,713,055 times
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I don't understand why complain about being charged a fee (it is totally more work, yes) when you can so easily accomplish the same goal by yourself for free as outlined by a poster above.

All bi-monthly payments accomplish for you is making one extra P&I payment per year. You'd accelerate your payoff date even more if you made the one extra payment every January versus 1/12 of a payment each month, but it's not a huge difference in interest paid.
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Old 08-16-2011, 11:44 AM
 
Location: N of citrus, S of decent corn
34,525 posts, read 42,694,765 times
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This is unnecessary. Just get a 30 year mtg, and pay an extra $1000. a year on principal. Or you can also pay an extra amount on principle every month, according to what you can afford. You do not need to pay someone to set this up for you.
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Old 08-16-2011, 01:23 PM
 
Location: West Orange, NJ
12,542 posts, read 17,725,661 times
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Quote:
Originally Posted by warriorfan63 View Post
You could always throw an extra payment or two a year and get the same results without the extra fees.
yeah, i still make the extra payment at the end of the year. i get slightly less of the result, since the weekly payment cut down the principle slightly quicker. in the end, the fee is probably worth paying for the long term benefit, i just think it's a bit misleading that they charge such a fee.

Quote:
Originally Posted by NY Annie View Post
When I looked for a mortgagor, one of my requirements was a plan to make monthly principal only payments without penalty. We started in month 2 and have been doing so automatically every month but we can stop and start again at any time.

However, what I believe OP is asking is to not make a FULL mortgage payment on the due date but to make a series of 4 payments totalling the whole mortgage payment paid partially in advance of the due date. I have no doubt the bank wants to charge extra. I understand the reasoning behind your wanting to do it, OP (cutting down a wee bit on the interest), but from the bank's pov, it does require extra bookkeeping (albeit done by computer) but it is an extra step for them (1 more data entry by a person).
you are correct, instead of paying, say, $1,000 on august 26th, i would pay $250 every friday. a portion goes to principle, and a portion to interest. i did this with Bank of America, and within the first year i had cut 2 years off my payoff time on a 30 yr fixed. The fee really isn't tied to extra bookkeeping, it's a fee because they can. I work in IT audit and consulting, so I understand how the systems work. There's no data entry by a person. The funds go from my checking account to Fifth Third via EFT, and it's processed in a daily batch. That batch is processed every day of the month, given that people have different due dates. So adding 1 more line to the batch that is process adds no cost. The fee doesn't go towards costs whatsoever, it's just another way to boost profits. that's why i think it's ridiculous.

Quote:
Originally Posted by Debsi View Post
I don't understand why complain about being charged a fee (it is totally more work, yes) when you can so easily accomplish the same goal by yourself for free as outlined by a poster above.

All bi-monthly payments accomplish for you is making one extra P&I payment per year. You'd accelerate your payoff date even more if you made the one extra payment every January versus 1/12 of a payment each month, but it's not a huge difference in interest paid.
the only thing i can do is send an extra payment in. if i send a payment each friday of the month, and call, they won't apply the payment until the due date, unless i want it to be an extra payment aside from what's due. and yes, every 2 weeks or every week result in an extra payment...but it's not just that. the way it was structured at BoA i was making weekly payments towards P&I...principle was decreasing faster because they applied the payments weekly instead of monthly. so not only was i making an extra payment each year, i was also accruing less interest throughout the year as well without changing my total outlay.
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Old 08-16-2011, 01:24 PM
 
Location: West Orange, NJ
12,542 posts, read 17,725,661 times
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Quote:
Originally Posted by gentlearts View Post
This is unnecessary. Just get a 30 year mtg, and pay an extra $1000. a year on principal. Or you can also pay an extra amount on principle every month, according to what you can afford. You do not need to pay someone to set this up for you.
yeah, the extra payment isn't the question. it is the fact that my regular payments will only be applied monthly, instead of more frequently. i realize this only adds up to a small amount, but every penny counts on a large mortgage.
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Old 08-16-2011, 01:31 PM
 
Location: Richardson, TX
10,116 posts, read 16,713,055 times
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Quote:
Originally Posted by bradykp View Post
yeah, the extra payment isn't the question. it is the fact that my regular payments will only be applied monthly, instead of more frequently. i realize this only adds up to a small amount, but every penny counts on a large mortgage.
which is why if you want to make your pennies count the most, you should make the payment in a lump, as early in the mortgage as you can manage.
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