Author Topic: Mortgage holder charging for biweekly payments?  (Read 7945 times)

The Money Monk

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Mortgage holder charging for biweekly payments?
« on: June 23, 2014, 03:43:39 PM »
I have my mortgage with BB&T and currently auto-pay my mortgage monthly. I wanted to switch to a bi-weekly payment as it saves a shitload of interest and shaves a bunch of time off the loan, but apparently they only offer that service through a 3rd party company called 'Pay Map'.

I called them and they want a one-time $220 fee plus $5 a month for the privilege of auto-paying every two weeks instead of once a month.

ANybody else dealt with this? Obviously I could just manually pay every two weeks, but it seems like the chances of accidentally missing a payment over the next 25 years are non-trivial.

If I just do the same amount extra as a one-time payment once a year, does the math work out the same?

nereo

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Re: Mortgage holder charging for biweekly payments?
« Reply #1 on: June 23, 2014, 04:00:29 PM »
That's awful about the extra fees.  That would be enough to make me stay away
I wanted to switch to a bi-weekly payment as it saves a shitload of interest and shaves a bunch of time off the loan...
If I just do the same amount extra as a one-time payment once a year, does the math work out the same?
Paying bi-weekly does shave time off the loan, and saves some interest, but perhaps not quite as much as most people think. The main driver of why is shaves time and saves money is because you make 26 "half payments" instead of 12 "full payments".  In effect you are paying an month each year.  THAT's what cuts the time down.

I'd recommend taking your monthly payment and increasing it by 8-10%.  You will see the same effect (paid off sooner, less interest) and you won't be paying "Pay-Map" any fees.
Just for some "pretend" numbers, if you had a $250k mortgage @4% with a 30yr term, if you paid biweekly you'd shave 4 years off the mortgage and save $28k in interest.  But, if you just increased your monthly payments by 8% it will be almost identical to the bi-weekly plan (ok, you'd pay 1.2k more in interest, and +2 months, but that's pretty small on a 30 year note). 
At 9% monthly overpayments you beat out the bi-weekly plan.

You could also pay the extra amount as a lump sum once a year, but the benefits won't be quite as large because you will accrue interest on that amount during the year.

deborah

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Re: Mortgage holder charging for biweekly payments?
« Reply #2 on: June 23, 2014, 04:08:35 PM »
Why can't you set up automatic payments from your bank account? My bank account lets me set up payments this way (me paying them, not them pulling an amount from me). I would prefer to make fortnightly payments, as it automatically goes in and out of my account the day I am paid, and it is never mine to spend. I can always change the amountby going into my bank account, rather than trying to get them to change the amount they are pulling.

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Re: Mortgage holder charging for biweekly payments?
« Reply #3 on: June 23, 2014, 04:10:14 PM »
Did you call the lender and get referred to this company?  Or did this company solicit you?  There are a number of companies that have sprung up recently that offer this "service" for a fee.  I'm getting a letter or two a week now from these folks, as I have multiple mortgages.  Giving an unknown company access to your checking account in my view is very risky.  They have no relationship with the lenders and you have no guarantee the payments will be made.  It's you that gets the late fee and the ding to your credit report when they fail to make the payment.  And if the company goes under, you may have to make up one or more mortgage payments with no ability to recover the loss.

rmendpara

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Re: Mortgage holder charging for biweekly payments?
« Reply #4 on: June 23, 2014, 04:22:56 PM »
I have my mortgage with BB&T and currently auto-pay my mortgage monthly. I wanted to switch to a bi-weekly payment as it saves a shitload of interest and shaves a bunch of time off the loan, but apparently they only offer that service through a 3rd party company called 'Pay Map'.

I called them and they want a one-time $220 fee plus $5 a month for the privilege of auto-paying every two weeks instead of once a month.

ANybody else dealt with this? Obviously I could just manually pay every two weeks, but it seems like the chances of accidentally missing a payment over the next 25 years are non-trivial.

If I just do the same amount extra as a one-time payment once a year, does the math work out the same?

Just set up an extra payment each month and pay down your loan faster. Semi-monthly loan payments (what you're suggesting), is basically a refinance with a different payment structure.

Is there a reason you can't just make additional payments?

The Money Monk

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Re: Mortgage holder charging for biweekly payments?
« Reply #5 on: June 23, 2014, 04:43:41 PM »
Did you call the lender and get referred to this company?  Or did this company solicit you?  There are a number of companies that have sprung up recently that offer this "service" for a fee.  I'm getting a letter or two a week now from these folks, as I have multiple mortgages.  Giving an unknown company access to your checking account in my view is very risky.  They have no relationship with the lenders and you have no guarantee the payments will be made.  It's you that gets the late fee and the ding to your credit report when they fail to make the payment.  And if the company goes under, you may have to make up one or more mortgage payments with no ability to recover the loss.

I asked the lender to switch my account to bi-weekly payments, and they referred me to this company.

The Money Monk

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Re: Mortgage holder charging for biweekly payments?
« Reply #6 on: June 23, 2014, 04:46:10 PM »

Just set up an extra payment each month and pay down your loan faster. Semi-monthly loan payments (what you're suggesting), is basically a refinance with a different payment structure.

Is there a reason you can't just make additional payments?

No reason, I just thought it would be a simple matter to switch over. They do let me adjust the amount of the monthly payment, so I will just add like 15% to it. Seems to be the easiest way. I just hadn't done the math to see how each option worked out, and it seemed bizarre to me for them to charge for that service (especially since they are already taking auto-payments)

Emg03063

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Re: Mortgage holder charging for biweekly payments?
« Reply #7 on: June 23, 2014, 08:02:32 PM »
If there's no prepayment penalty, just set your payments up to push from your checking account with bill pay instead of pulling from the mortgage company.

arebelspy

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Re: Mortgage holder charging for biweekly payments?
« Reply #8 on: June 23, 2014, 10:00:14 PM »
Agreed with all the people who suggested bill pay.  Just set up one on the 1st and one on the 15th of every month (or whatever).
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agent_clone

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Re: Mortgage holder charging for biweekly payments?
« Reply #9 on: June 24, 2014, 04:03:32 AM »
My question would be, how frequently are you paid?  If monthly then I would just up the contribution you make each month and pay it a couple of days after you get paid.  If fortnightly (bi-weekly I think), then it may make sense to pay just after you've been paid.  However I wouldn't be paying an extra $5 for that.

Ultimately it is essentially putting as much into your loan as soon as you can (if that makes sense).  As others have stated you could always set up your transaction (checking?) account to automatically deposit extra amounts into your loan if you want.

I'm not sure about for the US, but for Australia some loans have a limit as to how much extra you can pay each year (this is usually just if you are on fixed interest and is usually about $10k).

gooki

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Re: Mortgage holder charging for biweekly payments?
« Reply #10 on: June 24, 2014, 04:33:04 AM »
Also make sure you actually pay less interest when paying fortnightly. To me, it sounds like the third party is simply holding your money until your monthly payment is due, and then paying the bank.

I.e. no financial benefit to you, as the terms of your mortgage haven't changed.