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I just saw online a company that offers to set up your mortgage to bi-weekly thereby saving interest.
I am not interested in paying a company because I think it is a scam.
However, I am interested in paying bi-weekly payments. I guess some months you will make extra payment because that month will have 5 weeks instead of 4.
But can you also save money because by paying biweekly, a portion of your monthly mortgage would already be paid and therefore not subjected to the next months interest.
Can I set this up myself? Why can't I make 1/2 my monthly mortgage payment the 1st (of course a month in advance so I am not default on my mortgage payment) and then pay the other 1/2 on the 15th.
This would not be an extra principal payment... I would be interested in paying my monthly mortgage in 2 payments in one month.
Would I see any savings if I did this myself?
Last edited by kcam213; 01-14-2009 at 07:34 PM..
Reason: clarity
Be careful...I did that about 5-6 years ago, on my own.
A couple months later, my bank contacted me for not paying on my loan. The computer "wasn't set up" to handle payments like that, and I wasn't able to do it. It was a small, local bank.
I think what your saying is pay the full payment on the first and another half payment on the 15th. the extra half payment would be applied to the princple. It would reduce your pay off by the extra payment. I'm sure you can do that without any cost or set up. I agree those companies are a scam. As far as I know, any extra payments are applied to the priciple. the mortgage company has to accept them.
I don;t know another way to do it. You can probably call the mortgage holder and see if you make an extra payment and get a month ahead, that they will let you make a half payment. That way, you will always be one step ahead on the payment.
I agree with what your trying to do. I usually just make an extra payment. it all goes to the principle.
If my mortgage is $1200. I am paid up to February. So before March rolls around, I make a $600 payment on February 15. But that is not an extra payment, that is the 1st half of March's payment. I pay another $600 on March 1st. Now March mortgage has been paid in full on the 1st as contracted.
But the $600 that was paid on February 15, is there a way I can make my MONTHLY payment in 2 payments and thereby benefit from saving on the interest charge those last 15 days of each month.
It is a small amount but over the years, it would seem to add up on interest savings.
Am I being more clear now? I know it sounds confusing but I would like to do biweekly payments on my own. Is there a way?
Be careful...I did that about 5-6 years ago, on my own.
A couple months later, my bank contacted me for not paying on my loan. The computer "wasn't set up" to handle payments like that, and I wasn't able to do it. It was a small, local bank.
My current one does though. Saves a bundle.
Quote:
Originally Posted by kcam213
No not an extra payment.
If my mortgage is $1200. I am paid up to February. So before March rolls around, I make a $600 payment on February 15. But that is not an extra payment, that is the 1st half of March's payment. I pay another $600 on March 1st. Now March mortgage has been paid in full on the 1st as contracted.
But the $600 that was paid on February 15, is there a way I can make my MONTHLY payment in 2 payments and thereby benefit from saving on the interest charge those last 15 days of each month.
It is a small amount but over the years, it would seem to add up on interest savings.
Am I being more clear now? I know it sounds confusing but I would like to do biweekly payments on my own. Is there a way?
I understand you.
I'd call the bank and ask.
I know with credit cards I have paid too far in advance and they just considered it an extra payment. Then they said I didn't make my payment that month and charged me a late fee.
I also know though that with my car payment, if there is an extra payment it comes off the amount due the next month. So with this I could do as you are suggesting and break the payment into two portions.
Same thing with my school loans and a car loan I had with a Credit Union. If you paid double the monthly amount, it was credited toward the next month's amount due.
But as vetegnc stated, you need to call the bank and make sure that the payments will be applied properly or you could find yourself behind on the mortgage.
I am paying my mortgage bi-weekly which was an option offered by my mortgage company, Chase. Since there are 26 payments a year the extra 2 are applied in full (less the $4.15 per transaction fee for this option) to the principal reducing the principle balance, thus avoiding the interest on same resulting in a reduction in the life of the mortgage. I like it.
I have a small monthly mortgage. With that in mind here are some numbers.
It will cost me $2,265.90 in fees (the $4.15 for 21 years)
I will save $11,200.81 in interest (less the $2,265.90 fees for a net saving of $8,935.00)
My mortgage will be paid off 25 years from its initiation rather than the 30 signed up for.
Keep in mind my mortgage are probably 25% or less than the minimal amount of most. So if yours is 4 times mine theoretically you could save $44,000 in interest.
Your best bet to set up the bi-weekly payments is to contact your own mortgage company. They may already have a system set up for it. You know who your dealing with and thus avoid any potential scammers.
Thanks,
I didn't know your bank could set this up for you.
I hope my mortgage company is flexible to have this option.
So the savings is not so much from the extra 15 days of "pre-paid" mortgage payment but the extra 2 payments per year applied to the principle.
I may be able to just make 2 extra paymetns to principle myself and avoid dealing with the mortgage company if this is the way you are saving money on interest.
Be careful...I did that about 5-6 years ago, on my own.
A couple months later, my bank contacted me for not paying on my loan. The computer "wasn't set up" to handle payments like that, and I wasn't able to do it. It was a small, local bank.
I know someone who wasn't allowed to do that either, and she wasn't reimbursed for the late fee.
"So the savings is not so much from the extra 15 days of "pre-paid" mortgage payment but the extra 2 payments per year applied to the principle."
Actually I believe it is from both the 14 days of pre-payment and from the extra 2 payments being applied to principle.
Also, I just read my contract. It will cut 6 years off the life of my mortgage, not the 5 mentioned above.
"I may be able to just make 2 extra paymetns to principle myself and avoid dealing with the mortgage company if this is the way you are saving money on interest."
Be smart about this. Try to set it up through your mortgage company. at least have a sit down discussion with them and document your discussion to avoid some unforeseen problem considering the way financial institutions are doing business these days. In addition they may give you the interest and mortgage life savings to help in your decision. That's what I did.
I also read all posts above and your mortgage is almost 4 times mine.
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