the Big Deal About Bi-Weekly Mortgages? |
Okay, enough is enough about all of this bi-weekly hype! For almost
fifteen years I have been showing people how to save thousands of
dollars in interest on their mortgage by paying additional principal
payments. In November, 1995, the first version of Mortgage Minder
for Windows was released to the public to help people track those
extra payments and their mortgage reduction progress.
Since then a
lot has changed, and in the last few years I have seen hundreds
of ads claiming they can save you thousands of dollars on your mortgage
by converting it to a bi-weekly mortgage. I get e-mail from people
every day asking me about these services and why my software does
not support bi-weekly mortgages. I'd like to answer that question
right now. Mortgage Minder doesn't
support bi-weekly mortgages, because for the most part, they don't
exist. Mortgage Minder
does support a simulated bi-weekly payment plan, which is most
likely what you will be buying if you use one of those bi-weekly
mortgage services. Hopefully this document will show you why I make
these statements and will answer some other questions you may have
about bi-weekly payment plans and the companies that offer them.
First of all
let me tell you, I am not a financial expert, and I don't play one
on TV. But, I have been reading and writing about mortgage reduction
strategies for many years and have built a small business around
that passion. A small business that provides the tools and information
necessary for people just like you to plan and implement a do-it-yourself
mortgage reduction strategy. I have worked hard to build a trust
with my readers and software users and would not intentionally mislead
them in any way. In fact I want you to verify everything I am saying
here. Search the web, read the information, ask the questions. I
want to provide you with the most accurate information possible
to help you get started. But in the end, make your own decisions
about your mortgage and your money. I also want you to buy my software;
that is one of my main goals here and I make no apologies for that.
My software and the income it produces are the reasons this site
exists, and I truly believe Mortgage Minder can help you with your
mortgage reduction strategy. But even if you choose not to buy Mortgage
Minder, the information on this page will benefit you, so please
With that said,
let's move on..
is a Bi-Weekly Mortgage Anyway?
Technically, a bi-weekly mortgage would be a mortgage where interest
is calculated every two weeks instead of once a month. I
have heard they exist, but I've personally never seen one.
And there is a very good chance that the mortgage you are paying
right now is not a true bi-weekly mortgage. One source of
confusion for a lot of people is they confuse a bi-weekly mortgage
with a bi-weekly payment plan. They are two totally different animals.
This confusion is compounded when the companies offering a bi-weekly
payment service enter the picture. They are the ones making claims
- Save thousands
- Build equity
three times faster.
- Pay off your
- No refinancing.
- No credit
- No increase
in you current payment! This
one kills me, it's a flat out LIE, but some actually make this
things even more, a lot of these services are sold via telephone
and the person on the other end of the phone may not even have a
clue what they are talking about, they are just reading a script.
Now, lets take
a look at how this all works. Grab a pencil, paper, and something
with caffeine or lots of sugar, this gets a little dry! To make
calculating easy, lets say your current mortgage payment is $1,000.00
each month. This is the principal and interest amount only; we don't
care about taxes and insurance for these calculations since they
have nothing to do with, and do not affect, your loan balance. So
assuming you pay $1,000.00 a month;
that is equal to $12,000 a year, right?
Here is the
way the bi-weekly payment plan works. Instead of paying $1,000.00
every month, you pay half of that, or $500.00 every two weeks. The
result? You save thousands in interest, build equity faster, cut
the term, etc., etc. Just like they said you would, and you didn't
have to refinance, so your credit had nothing to do with it. The
one part that is NOT true is the part about your payment
not increasing. Take a closer look at what just happened.
If you pay $500.00 every two weeks and there are 52 weeks in a year,
that means you will make a total of 26 payments of $500.00 each,
or $13,000.00. Wait a minute! Paying monthly, you only
paid $12,000.00 a year in principal and interest payments, but on
the bi-weekly schedule you are paying $13,000.00 a year. That's
like making an extra payment every year, and that
is why it cuts the term and saves you money in interest, not because
you are paying more frequently! In
fact the frequency of the payments has NOTHING to do with
it in most cases, because as you will see in the next section, your
bank is still getting paid monthly!
Looking a little
closer at these bi-weekly payment services, you will find that even
though they have you pay them every two weeks, your mortgage company
is still getting paid monthly. The way most of them work is like
deduct your bi-weekly payment ($500.000 in the example above)
automatically from your checking account every two weeks and deposit
it into their account. When your monthly mortgage payment is due,
they pay it. This goes on for six months, at which
time you have made 13 of these "half" payments, which
equals 6 and one half monthly payments. So when they pay your
sixth monthly payment, they also send in the extra half payment
to be applied to the principal amount. And the whole things starts
over again for the next six months. They then do the same thing
on the twelfth payment. Some of these services actually wait until
the twelfth payment and pay a full extra payment for you. You
might hear this called a "half every six" or a "full
every twelve" method.
There are two very important things to remember here. ****
is the extra principal payment amount that reduces or accelerates
your mortgage, NOT the payment frequency. (If you get nothing
else from this entire site, remember this)
You are paying extra principal payments when
you use a bi-weekly payment service, and guess who has the use of
your extra payments until they decide it is time to send it to the
mortgage company. Not you!
You didn't need
to refinance, because your mortgage hasn't changed. And since your
mortgage didn't change, why would you need a credit check. These
guys put a lot of emphasis on these points to make you think they
are tightly associated with your mortgage company and to make you
feel like you are getting a special deal, a one time only opportunity!
In some cases, the only contact they have with your mortgage company
is when they send your payment to them every month. And as far as
your mortgage company is concerned, they don't really care who pays
them as long as they get a check and the account number to apply
it to. There is a good possibility that the mortgage company has
no idea who these people are and doesn't care. I have heard of situations
where the mortgage company was somewhat affiliated with the bi-weekly
payment service. They were actually getting kick backs on the fees
you pay to sign up for the service. These would be especially annoying
since the company is going to claim close affiliation with your
mortgage company, but when you call the mortgage company, they are
not aware of any such an arrangement. I have also heard of mortgage
companies themselves offering a bi-weekly payment service, but guess
what, the payments are still applied monthly.
I hate to break
the news to you, but I think you already know anyway; there is no
magical way to pay off your mortgage early without paying more each
month than you do currently. You will have to make your own "special
deal" using your knowledge of how the system works.
I don't care if you make bi-weekly, weekly, or even daily payments,
if your mortgage is amortized monthly (and it most likely is),
you will not pay your loan down any faster until you add some extra
money each month. I absolutely promise you this is a mathematical
But don't worry; you don't have to come up with a bundle each month
to make a big difference. Download the demo version of Mortgage
Minder and take a look at how much you will save by sending in an
extra 30 or 40 bucks each month. I think you will be amazed, I am
still amazed every time I run a report for someone, and I have been
doing this for a long time. Remember, 30 bucks a month is only $360
a year, how much do the bi-weekly mortgage services cost? Why not
keep your money and make the extra payments yourself? On a typical
$100,000 mortgage that $30 a month for the first 12 months will
save you over $3,700 in interest and cuts the term by four payments,
and that's if you never pay anything extra after that! If you keep
paying the $30 every month, you will knock 4.25 years off the term
and save over $29,500 in interest! Download
Mortgage Minder right now and see for yourself!
it Yourself and Save!
FACT - You
can pay additional principal payments all by yourself.
You do not need permission from anyone, or assistance from one of
these companies. You don't even need my software, although I think
you will find it more than helpful and well worth the modest price.
Don't take my word for it though, pick up the phone right now and
call your mortgage company. Ask them if you pay an additional amount
each month, will they apply it to the principal. Then ask them if
it will significantly reduce the amount of interest you will pay
over the term of the loan. I'll bet the answer is yes on both counts,
in fact I know it will be. It is always a good idea to make a quick
call to your mortgage company anyway to let them know that you are
making additional payments and that you want these payments applied
to the principal, not escrow just so there is no misunderstanding.
Always check your statement to make sure it was applied properly.
- Companies like the ones mentioned
above who provide the bi-weekly payment service can charge from
$125 to $750 or more just to set you up. On top of that,
some charge an additional $2 - $8 every two weeks as a transaction
- Most mortgage companies will not accept a payment
that is less than the regular, minimum payment amount, but they
will accept an extra amount without hesitation. Call your mortgage
company and ask them. This is proof that these bi-weekly payment
services are taking your money on a bi-weekly basis and paying your
mortgage monthly. You can pay any additional amount with any monthly
payment. All you need to do is decide how much extra you can afford
or figure out when you would like to have the mortgage paid in full.
Maybe you want it paid off just before the kids go off to college,
or maybe right before you retire. You get the picture.
- With Mortgage Minder software, you can
select the payoff date and it will tell you how much extra you will
have to pay each month to pay off your mortgage by that date. It
will then allow you to track your progress on as you go.
Note - Although I do not agree with the way most of the
bi-weekly services are promoted and presented, I am sure there are
some of them out there that are very up front with you about how
things work. In some situations, where people do not have enough
self-control, using a service like this to control the process may
be just what the doctor ordered. In fact, if you stick with it,
the amount you save in interest could be well worth the initial
investment, but if and only if you cannot accomplish the same goal
on your own. Also, it is important to note that some of these companies
also claim to audit your year-end statement from your mortgage company.
It is possible that your mortgage company may have overcharged you
for something and owes you a refund. This is most common with variable
interest rate loans. Did I mention Mortgage
Minder supports variable interest rate loans? And did
I mention that even if you decide to use a bi-weekly payment service
you could still use Mortgage Minder to track your progress.
Mortgage Minder Software Can Help!
I designed Mortgage Minder to calculate the effect of making extra
principal payments. So for those of you that have ask why it does
not support bi-weekly payments, I think you know the answer now.
The truth is, it does support the bi-weekly
payment structure described above, I just don't call it bi-weekly
anything, and now that you know how it works, you can customize
a plan to fit your needs and call it whatever you like.
Once again, most bi-weekly payment plans are actually monthly payments
with an extra principal payment every six or twelve months. Using
Mortgage Minder, you can easily simulate this by adding an extra
half payment every six months or an extra full payment every twelve
was designed for people like you and me, not for mortgage professionals
who can calculate this stuff in their sleep. Mortgage Minder is
very powerful and feature rich, yet easy to use and understand.
It lets you know instantly, and
in plain English how much you will save using a certain
payment plan. You can even save several different plans to compare
savings potential or save different loan information for multiple
properties. You can print reports, compare
payment tables, calculate a certain payoff date, add a single extra
payment or automatically repeat an amount every so many months.
Mortgage Minder supports US and Canadian
calculation methods and fully supports variable interest rate mortgages.
Download the demo right
now and give it a try! We all have software to keep track
of addresses, taxes, bills, pictures, our health, our schedules,
our kids, our pets, and anything a person can think of to collect,
and even more software to print labels, write checks, send faxes,
chat with people you don't even know, etc., etc. Isn't it time you
had software to help you manage what was probably the single biggest
purchase of your life, software that puts YOU in control of your
mortgage reduction strategy? Software you will use today, next month,
and next year. If you start a plan today and stick with it, your
small Mortgage Minder investment will still be paying off several
years from now in the way it allows you to track and print your
progress over the years. If you move or get a new mortgage, Mortgage
Minder is ready to go, just type in the new loan information. Mortgage
Minder keeps you motivated when you track your progress, it's easier
to continue when you can see the results. It is very important to
get started ASAP. The longer you
wait, the less you will save! Get started NOW!
I have given
you all of the information you need above to avoid the bi-weekly
payment services and save thousands in interest by paying additional
monthly principal payments yourself. You do not have to have Mortgage
Minder, but if you are serious about a mortgage reduction strategy
whether you use a bi-weekly payment service or not, I think you
will find it to be an invaluable tool at a very modest price.
Tens of thousands
of users since 1995 have discovered the benefits of using Mortgage
Minder. Isn't it time you do the same? I get email from users all
the time, some of them have been using Mortgage Minder since the
first release. If you are serious about planning and implementing
a mortgage reduction strategy, you will use and keep on using Mortgage
Minder. Or, if you are just kicking the idea around, Mortgage Minder
is still well worth the price to give solid, easy to understand,
accurate, answers. It is not one of those programs you use once
and then never go back to (you know the ones I mean).
comes with a 100% money back guarantee. If you are not completely
satisfied for any reason, remove it from your system and I will
refund 100% of the purchase price, no questions asked. You have
nothing to lose.
the fully functional trial version and give it a try.
when you are ready you can purchase Mortgage
Minder on-line using your credit card and get a code to unlock
the demo version instantly! No waiting for the UPS truck, you get
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