Are Bi-weekly Mortgage Payments A Good Idea?

If you want to become instantly popular, all you have to do is re-finance your mortgage. Granted, you probably aren’t going to end up being popular with the kind of people you want to be popular with, but if you’re the type that likes a little extra attention now and then, this might work for you. In this case, your new-found admirers are going to be local businesses like carpet cleaners, contractors and lawn care services who all seem to believe that financing your house is a sign that you are anxious to spend all that extra money you are saving with your new, lower mortgage payments.

Another type of company that will be vying for your attention – and your dollars – are those that offer homeowners bi-weekly mortgage payments. As you may already suspect, these companies will most likely make all kinds of promises about how much money you can save by making more frequent payments on your mortgage. If you’re the type that likes to cut to the chase, the best advice for homeowners who receive phone calls or mailings from these kinds of companies is to just say no.

Like so many other companies out there these days, companies that try to convince you to sign up for bi-weekly mortgage payments are interested in one thing and one thing only: Making money. They aren’t at all interested in offering a useful service or helping consumers, and are more likely to cost you more money than you will ever be able to save. What they don’t tell you is that homeowners can make their own arrangements for bi-weekly mortgage payments for free without the “help” of some fly-by-night financial company.

So, what’s the deal with bi-weekly mortgage payments anyway? Well, if you are not entirely sure, here’s a quick run-down: Homeowners normally make their mortgage payment once per month. If you decide to go with a bi-weekly payment, you would be making payments every two weeks and paying half of the normal monthly amount each time. As we all know, there are 52 weeks in a year and when you do the math that means you end up making 13 full mortgage payments in a year instead of the usual 12. The big advantage is supposed to me that one extra mortgage payment you make every year, but it’s a dubious advantage at best.

The whole idea begins to fall apart when you consider that the interest on mortgages are computed once per month, bi-weekly payments really don’t save you money. While pre-paying does reduce interest payments on things like credit cards where balances are computed on a daily basis, making bi-weekly mortgage payments all the potential savings come from paying down the principal balance by the amount of the single extra payment that is made each year.

Paying down your principal balance is actually quite easy and does not have to involve making extra payments or the shady companies that promote the idea. All you have to do is include some extra money with your regular payment and designate the money towards paying down your balance. The payment coupons lenders provide make this very easy to do, as do the online options borrowers can use to make their payments. And if you prefer to make those payments every two weeks, you are quite free to do so!

It’s a good idea to be skeptical when companies contact you to tell you how much they can “help” you. In this case, companies promoting bi-weekly mortgage companies may be trying to take advantage of you by offering a service that is essentially useless and is something you can do yourself at no cost. They surely won’t go out of there way to tell you that, however.

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