What's the Big Deal About Biweekly Mortgages?
this biweekly 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
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
biweekly mortgage. I get e-mail from people every day asking me
about these services and why my software does not support biweekly mortgages. I'd like to answer that question right now. Mortgage
Minder doesn't support biweekly mortgages, because for the most
part, they don't exist. Mortgage Minder does support a simulated biweekly
payment plan, which is most likely what you will be buying
if you use one of those biweekly mortgage services. Hopefully this
document will show you why I make these statements and will answer
some other questions you may have about biweekly 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 hobby. A small
business that provides the tools and information necessary for
people just like you to plan and implement a mortgage reduction
strategy all by themselves. 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. 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 read on.
With that said, let's move on...
What is a Biweekly Mortgage
Technically, a biweekly mortgage would be a mortgage where
interest is calculated every two weeks instead of once a month. They
are like UFO's, people say they exist, but I've personally never
seen one. One source of confusion for many people is they
confuse a biweekly mortgage with a biweekly payment plan. They are
two totally different animals. This confusion is compounded when the
companies offering a biweekly payment service enter the picture.
They are the ones making claims like:
||Save thousands in
||Build equity three
||Pay off your home
||No credit check.
||No increase in your
current payment! This one kills me, it is a flat out LIE,
but some tell you this!
To complicate 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 biweekly 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 biweekly 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 biweekly
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 this:
They deduct your biweekly 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. ****
1. It 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
2. You are paying extra principal
payments when you use a biweekly payment service, and guess who has
the use of your extra payments until they decide it is time to send
it 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 don't care. I have heard of situations where the mortgage
company was somewhat affiliated with the biweekly 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 biweekly 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 biweekly, weekly, or even daily payments, 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 FACT!. 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 biweekly 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!
Do 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
FACT - Companies, like the ones
mentioned above, who provide the biweekly 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 fee.
FACT - Most mortgage companies will
not accept a payment that is less than the minimum amount, but they
will accept an extra amount without hesitation. Call your mortgage
company and ask them. This is proof that these biweekly payment
services are taking your money on a biweekly 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.
FACT - 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.
Special Note - Although I do not
agree with the way most of the biweekly 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 biweekly 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 biweekly payments, I think you know the answer
now. The truth is, it does support the biweekly payment structure
described above, I just don't call it biweekly anything. Once
again, most biweekly 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
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 biweekly 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 biweekly payment service or not, I think you will
find it to be an invaluable tool at a very modest price.
Thousand of users since 1995 have
discovered the benefits of using Mortgage Minder. Isn't it time you
do the same? I get email from customers 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).
Mortgage Minder 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.