At some point in the past, I'm sure I read that one way to pay off a mortgage faster was to make your payment every 4 weeks instead of once a month (13 payments per year instead of 12). We've been doing that for the last 6 years, so we are 6 months ahead on our mortgage payment. We like this because we feel it gives us a nice cushion for an emergency as we could stop making payments for several months if needed.
Our bank just sent us a letter saying that they will no longer allow us to do this. It also says that paying ahead does not pay off the loan any sooner.
Does anyone know if that is correct? Maybe I'm thinking about the math incorrectly, but if we are making an extra payment every year, won't those add up over time and in fact, pay off the loan early? It's a 30 year fixed mortgage, if that is relevant.
I'm seriously considering moving our loan to another bank because of this. We could probably get a lower interest rate if we move as well (currently we're at 4.5%, it looks like we could get 4% elsewhere). Additionally, the mortgage is through a different bank than the one we use for our day to day checking/savings, so I wouldn't mind having everything at one location. Our regular bank is advertising 4% rates on 30 year fixed mortgages. Moving it hasn't felt worth the effort in the past, but this might be the catalyst that makes it worth it.