Electronic Mortgage Payments

B.,

I have been paying my mortgage payment this exact same way for years through two different houses and mortgage companies. I have had nothing but positive experiences handling it in this manner.

C.

We have had experience with several mortgage lenders and they pretty much have all offered the service you are describing. The fact that lenders offer this service is not so that you can pay off your mortgage early. It's so they can get that extra $200+ in fees per year (for 23+ years) as long as you are in that program. The fact that your mortgage is paid off early because you build equity faster is just a consequential benefit for the borrower, but not the main reason a lender offers that service. If that were their primary reason for offering it, there would be no extra fee. :-)

I personally think it's better to do electronic bill pay that's free thru your checking account, if your bank offers free bill pay, and save the fee from the lender while getting the benefit of faster equity at the same time. Like one of the other moms described, divide your monthly mortgage payment by 12 and add that to your monthly payment. This has the same effect as paying bi-weekly. On our bill pay service, there is a "memo" line so we make a note on the memo line stating "Please apply added $### to principal." That way you don't have to remember anything extra, the bank automatically pays your mortgage for you electronically every month, you get the same benefit of paying bi-weekly and you're keeping hundreds of dollars in fees in your own bank account rather than paying the lender money just to take your payment. That's what we do anyway. :-)

Our bank and mortgage lender, Bank of America, keeps pushing us to do the same thing. We asked our financial advisor about it and she did some research and said DON'T do it! Here are two articles she gave us:
http://www.bankrate.com/brm/news/DrDon/20070103_biweekly_...
http://www.bankrate.com/brm/news/DrDon/20050713a1.asp

She said to especially be VERY wary of any program that wants to charge you a fee for this, too. Hope that helps!

Definitely a great idea. You will pay off your home sooner. I did the same thing and it saved me alot of $$$$$

Hi!

We have been advised to just make the extra payments on our own! We can achieve the same thing, but we're not locked into it if we need to skip an extra payment for some reason.

S.

I think most of these companies are doing that. Yes you can pay off your mortage sooner doing that. In College they also told us to get a mortization I think that is what it is a schedule of payments. Then what you do is pay your month but add the interest for the next month going to principal. We pay way to much for our homes with the interest. If you can keep adding to that prinicpal the reduce the years of interest you save a ton. Also someone tried to get me to do something with a creditcard and I never really looked at it but he said by doing that he could have his house paid off in 8 years. But probably risky. G. W

Yes, actually it works because you wind up paying 1 extra mortgage payment a year if you pay every 2 weeks instead of once a month. So, you cut about 6 years off of the life of your mortgage (if you stick with it). You can also pay your monthly mortgage and add $200 or so to the prinxiple every month. That way you know that the extra money is going to pay the principle and not the interest. If you do add on $200 a month to your regular mortgage payment, just make sure that you specify that you want the $200 to go toward principle. Let me know if you have any more mortgage questions, I would be glad to help. Good lock!

H.

B.,

Yes! Do it! You will get out of your mortgage payments in about 23 years, instead of 30. It will save you thousands in interest because you end up making an extra payment within the year when it comes out every two weeks. Plus, it can be friendlier to your budget. When our new house if finally done, I am signing up for it too! If you don't feel comfortable doing it with your mortgage company, then sign up for it at your bank.
One word of caution - If you can be responsible, when the months come along where you will have 3 bi-weekly payments (two times a year), just make the payment by yourself and state that you want it to go towards PRINCIPLE only. Otherwise, they might apply it towards principle, interest, and an escrow account you have associated with the loan (like taxes and insurance).
If you don't want to mess with that though, just sign up for the bi-weekly payment. You will get out of the loan about 7 years early.
E.

YES! And you can do this yourself. Don't get suckered into paying a fee for it. Plain old DISCIPLINE & adjusting your monthly payment a little each month & paying- even an extra $50/ mo. toward your principle builds the same equity, in the same way, but it doesn't cost you up front to do it. Why on God's greens earth do we let bankers get extra fees out of us for simple tasks we can do ourselves? Who do you think makes billions a year on such fees, interest & other such "gotcha items," AKA "stupid tax"-extra "taxes" we pay b/c we make stupid choices w/ our money? Eh gads, that just like making your tax deductions "zero" so you can "get back" more of your OWN money every tax season...your money, that the gov't keeps & doesn't pay you interest on. Eyes wide shut!

Be smart, do this one yourself!

D.

Not sure about the company in question but we do this through our mortgage company, wells fargo and it's great! Allows you to add equity without really noticing a difference in your payment. They will likely charge a very small fee but it's worth it in my opinion. If I had to physically write a check for the extra amount every month, I know it wouldn't happen. By them doing it for me I don't even notice the extra amount which essentially will help pay off my home alot quicker. Experts say by paying one extra payment per year, you will pay a regular 30 year mortgage off in 23 years! Of course the extra money needs to go towards the principal of the loan not the interest. Hope this helps!

yes. more and more are starting to do that... making more payments drops the interest on a house payment by quite a bit. we are enrolling as well in this.

If you are planning on staying in your home at least 5 more years, it's worth it. If not, don't bother. However, what they are offering will cost you up front as the lender will charge a fee for getting on this billing system. I found a much better (and free!) way to get the same results from watching Michael Holligan one early morning (up w/ my baby of course!) Simply take one monthly payment, divide it by 12 for the months of the year, then make that much payment extra toward your principal each month. Same results--loan paid off at least 7 years sooner on a 30 year, and equity builds faster.
(ex: mortgage payment $1200. divided by 12=$100. Pay $1300 per month.) You just have to make sure that extra $100 goes TOWARD THE PRINCIPAL, not just thrown into the payment, because it will simply go toward the interest if you do that.

I believe most companies charge a fee for this. Our broker told us we could have the same effect by paying an extra payment on the anniversary date of your mortgage every year.

Hi B.,
If you understand the time value of money, then this makes sense. The mortgage company is not trying to scam you, although it does benefit them from a cash inflow standpoint. You will pay off your mortgage in less time, and therefore pay less interest (which is NOT equity!) over the long-term. Also, there is nothing keeping you or anyone else from paying MORE than your monthly payment each month. We pay extra each month, and it all goes toward principal. Also, any bank will offer electronic payments, whether it be twice a month or once a month. Definitely worth the fee, plus you save money on interest. The payment gets there faster than snail mail, so it posts immediately to the account balance.

This is well worth the fees. The equity builds quickly, helps pay your home off earlier and the program we are on will transfer to any home, free for life. We have been on this program for over seven years now and can see the difference on our monthly payment statements.

We have done the bi-monthly mortgage payments for a few years now. It does put a lot more equity into your home. It basically comes down to one additional payment a year.

The only drawback is that you have to adjust the way you do the bills. Make sure that you can have that payment come out every 2 weeks. It is half of your current payment every two weeks.