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Let Joe Know: Some banks hold bi-weekly mortgage payments
Posted: 11:42 AM, Nov 15, 2016
Updated: 2016-11-15 13:42:14-05
If you want to pay off your mortgage down faster, it seems like it would make sense to pay half the bill every two weeks right?
Nancy in Phoenix let me know when she signed up to do that, the money was not immediately applied to her account and is kept "in limbo until the second half comes in."
But if the partial payment isn't applied until the full payment comes in, how are you saving money?
Nick Clements, of Magnifymoney.com , said you may not be saving much.
"It's [the money] not earning interest for you and it hasn't reduced your mortgage balance," Clements said.
He said that by paying to enroll in some bi-weekly mortgage programs, you are actually paying them to pay them! But there is a way around it.
Sending half your mortgage every two weeks amounts to paying one extra payment in a year. So, instead of paying the bank to do it for you, Clements said, make that extra payment yourself.
"Take that payment, divide it by 12 and every month make an extra principal payment on your own," he said.
For example, if your mortgage is $1,000 per month you would add $83 to your monthly payment to get a similar benefit to paying bi-weekly.
Just make sure you specify that you want the extra money to go directly to the principal.
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