Bi-weekly Mortgages

United States
January 24, 2008 10:56am CST
Has anyone got one of these? I learnt about them about 15 years ago and basically it made sense. You start by paying 1/2 your house mortgage 2 weeks early, with the second payment being paid on the normal monthly cycle. This decreases your principle in advance and over the life time of a 30 year mortgage would probably cut off 10 or more years. This was great until the mortgage lenders figured out that they were losing money(sorry, not making as much money) and no matter when you send the money or when they cashed it, it wouldn't apply until your regular mortgage date, hence no savings for the consumer. Some mortgage companies have even put in clauses, which penalize early payment. Anyway, my mortgage company have offered this to me, but, it'll cost me a very small "setup fee" and an additional fee of about $3 a time. I know they are sure to have worked out a way to continue making money, but, for me it will reduce my mortgage by many years and allow me to have 2 more even mortgage payments a month than one big one at the begining of the month. Any cautions, anyone doing this? I would like some input on this before I dive in.
1 person likes this
2 responses
@lilybug (21148)
• United States
24 Jan 08
I would do it. It would end up working out to one extra mortgage payment per year plus the set up fee and the $3 fee, but in the long run it will be saving you LOTS of money. You would probably also be able to refinance after several years for a shorter term mortgage and pay it off even earlier.
2 people like this
@ebsharer (5518)
• United States
24 Jan 08
I was offered this type of mortgage and declined. I opted to just make larger payments. I figured out the cost and with my mortgage being 557 a month I pay 800 a month. I will be done in 8 years verses 15. When doing this you have to be sure they are applying to your principal NOT your next payment. This is saving me around 25,000. I also do this with my cars.
1 person likes this
• United States
24 Jan 08
That's what I do know, but, not to that extent and you are 100% right in making sure it's applied to the principle. The best way is to find out from day 1 what your principle payment is and double it. In the begining this is really easy as your interest will be about 90%+ of your payment. Trouble is that I am past that point. Thanks for the info. I wish my mortgage was as low as yours, mine is 1550 a month!
1 person likes this
@ebsharer (5518)
• United States
24 Jan 08
Beleive me its the house not a down payment. I'm in Pittsburgh and you can find houses really cheap. It still needs a lot of work but with the mortgage being so low we can afford to do every thing we want to make this our dream house.