Bi-weekly mortgage / loan repayment service - advice needed

[goose89]

Not sure if this is in right area, but I need "expert" advice.

I'm considering signing up with a bi-weekly loan / mortgage payment service. Without going into all the details of advantages, I'm curious if there's any potential disadvantages / free way to do this without sending checks on my own every two weeks. I'm willing to pay a bit (one time fee) to save alot, but don't like to be ripped off if there's a way I can make autowithdrawls / autopayments for free - through my bank for example. Thanks in advance.......

[LightningBG]

Not sure if this is in right area, but I need "expert" advice.

I'm considering signing up with a bi-weekly loan / mortgage payment service. Without going into all the details of advantages, I'm curious if there's any potential disadvantages / free way to do this without sending checks on my own every two weeks. I'm willing to pay a bit (one time fee) to save alot, but don't like to be ripped off if there's a way I can make autowithdrawls / autopayments for free - through my bank for example. Thanks in advance.......

Who is the mortgage with? With all of my mortgages I can set up this option on the website, just choose the option. I certainly wouldn't pay someone to do this for me, the bank/mortgage holder will most likely set up an auto withdraw for free. I wouldn't even pay a one time fee of $5. I also wouldn't sign a contract that says you "have" to keep doing the bi-weekly. If something happens, you may want to go back to monthly.

[goose89]

Thanks Lighting. I'm checking that right now. (US Bank).

[LightningBG]

Thanks Lighting. I'm checking that right now. (US Bank).

USBank should for sure. Give them a call. If you dont make any progress, let me know. I used to work for USbank. I can give you some numbers of people that will get it done.

[goose89]

Thanks for the offer.

ON-LINE, they (US Bank) states that they do NOT accept a bi-weekly payments, and refer you to another "equity / payoff" accelerator service. I'm assuming with similar charges / fees as the one I'm currently considering. I realize these services disperse the payments monthly to US Bank, although the collect the payments bi-weekly out of my bank account.

I could call US Bank, and muddle through their phone system. But if you could give me a name I could contact directly, I'd really appreciate it. goose55316 at m s n dot c o m (no spaces).

OR, would I be doing the same exact thing by making an extra mortgage payment during the year?? Or splitting up an extra payment by 12 months and adding that to monthly mortgage pay't?? Same difference? or is there some "majic" to the bi-weekly deal??

[mnguy152]

i like it so far i figure i have cut 2 to 3 years off my loan already

[DTro]

Making one extra monthly payment per/year is essentially the same thing, but it just takes a little planning to do it that way.

[goose89]

Kinda what I'm gathering. I'd like something set up where I don't have to think about it, and I can easily budget for monthly. Just adding 1/12 to my monthly payments seems about the best way after I think about it. The "service" companies make it seem like bi-weekly is the smart way to do it (and I can see how it seems like you're paying the same every month). But, you're still paying extra every year, and it's not worth paying someone to do it for me, I guess.

Thanks all for knocking some sense into me.

[LightningBG]

Yeah, you can just add a little payment onto the principle each month and it will do the exact same thing.

I'll ask a couple friends at the bank if they still offer it like they used to when I was there and I'll send you an email w/info/contact.

[LightningBG]

I stand corrected. I walked over to the branch (there is one about 200 ft from me) and talked to some of the people I know there. Things have changed a little bit since I work there (I worked DT Mpls, not at the branch).

They don't offer it directly, like you stated above.

Their best advice was to set it up online with a monthly payment of 1.083 times your normal payment. This will have the same desired affect. Make sure the extra money goes into paying down principle vs. adding to the escrow.

Let me know if you need anything else.

[goose89]

Thanks much Lightning. That all makes "cents". Glad I didn't sign up / pay for something so easily done on my own.

[merkman]

Be careful with this.

Many financial institutions like to trick unsuspecting customers with hidden fees, applying payments at different intervals, paying on the "wrong side" of the loan etc etc.

Read up on it on the net.

Read the fine print from your financial institution and make sure it is doing what you think it should. More times than not the bank will get their money. Sometimes they will get more for "providing this service"

When paying extra payments on a loan. Always, Always, Always tell the bank that the amount should go against the principal and double check your statement to make sure it does.

Here is one link to help to understand the pitfalls.

http://www.bankrate.com/brm/news/mtg/20010920a.asp

[goose89]

Good heads up merkman.

At the interest rate I'm at in a 15 yrs mortgage, I'm not saving the HUGE amount of money I'd be if I were in a 30yr at my old interest rate, and am only getting a little over 2 yrs shaved off the 15 yrs. It's still something to consider, but I might be better off setting that, and other available $$ in investments (IRA, mutual funds, bonds, ect, ect). I'm betting that investing this $$ will earn more than I'll save on the bi-weekly deal, even if I do it myself (IE - make extra principal payments).

Thanks for the advice. I hadn't had my coffee yet this morning when I started pondering this whole deal and was considering having some company, for a fee, make my bi-weekly payments to the mortgage company, for me . Not smart, IMO. Easy, but not financially wise.

[fisherdog19]

I was going to suggest the same thing, take the extra payment you would make and divide it by 12 and take that amount and add it to your regular payment. Make sure the bank knows to apply the extra amount added to your monthly payment apply it to principal reduction and you'll make an extra payment per year, on your own with no middle man or fees, same as bi-weekly payments.

[Tom7227]

I am pretty sure that there is a state law that says a bank cannot charge a fee for someone making a pre-payment on a loan. I cannot find the exact statute and I believe it only applies to some types of loans - it may only be for banks and not credit unions for instance. I just can't find the exact reference.

I made an electronic payment on my Well's Fargo loan that was higher than the monthly amount and they applied the extra to the escrow account. The on-line bill pay has no method of specifying where you want the extra money to go. When you write a check and send it in with the monthly bill it allows you to specify.

I don't think I would ever pay anyone for the right to pre-pay a bill. I also don't think I'd sign up to be forced to do it. As soon as I did that I'd get 3 flat tires or need to have my tonsils taken out.

[fisherdog19]

It is not a pre-payment penalty, it is a fee for signing up with a third party to make bi weekly payments for you, which is a little silly. Why would the lender allow it from a third party but not the borrower? I wouldn't be surprised if that third party was actually owned by the lender some way or another.

[goose89]

The third party, in this case, collects the money out of the borrowers bank account of choice, and disperses the money monthly to the mortgage company. They simply are collecting 26 payments a year or one months worth extra, and applying it against the principle. It's not rocket science or majic, like they make it appear. Very easy to do on your own, just takes a bit of discipline, and making sure the extra goes towards principle, not interest or escrow. They charge for convenience and assurance that it's going toward principal, which shouldn't be that hard to monitor.

Initially looked like a good deal, but as stated before...in my case....on a 15 yr refi at a low interest rate, I'd be better off (more than likely) investing that extra money. That extra money will make more than I'd save. On a 30 yr, might be a different story.

[fisherdog19]

Shaving 2 years off the 15 year would be a good bit of savings, but as you stated, if you can put the money away every month for 13 years with compounding interest, you may have a larger amount when you compare. Just out of curiosity, what rate did you get on your 15 year refi?