Bi-Weekly Mortgage

If you search for "bi-weekly mortgage" with an Internet search engine, you will be overwhelmed by the number of companies offering "Bi-weekly Mortgage Reduction Services" or "Bi-weekly Savings Programs." Beware, you are entering dangerous waters.

Beware of Bi-Weekly Mortgage Reduction Services and Savings Programs

These "Reduction Services" and "Savings Programs" are charging you fees to "make a bi-weekly mortgage payment" for you. The enticement is that they will save you an impressive amount of money on your mortgage and reduce the number of years you pay on your mortgage.

The real story is that they are not actually making bi-weekly payments on your mortgage. They are making bi-weekly deductions from your bank account. These funds are placed into an account from which your monthly mortgage payment is made (which only takes 24 deductions - but during the course of a year 26 deductions will be made from your account). With the extra 2 deductions, the "Service" makes an additional mortgage payment. In other words rather than making 12 mortgage payments, 13 payments are made for you.

The Pitch is that they are providing a "special service" to you that would either not be possible for you to get on your own or that you won't have the time or discipline to make it happen.

The reality is that you can easily make an additional mortgage payment each year yourself. An easy way to do this is to have your mortgage payment automatically deducted from your account each month with an additional 1/12 payment to be applied to the principal amount. At the end of 12 months, you will have made an additional payment. You won't have to pay the "initial set-up fees" nor the 26 Bi-Weekly transaction fees each year for a "special service"  and you can do it yourself. Plus, many lenders today offer the service for free to their existing mortgage customers. If there is no setup fee and no transaction fee you're fine, go for it if it's free.