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  What's the Big Deal About Bi-Weekly Mortgages?

Introduction
Okay, enough is enough about all of this bi-weekly hype! For almost fifteen years I have been showing people how to save thousands of dollars in interest on their mortgage by paying additional principal payments. In November, 1995, the first version of Mortgage Minder for Windows was released to the public to help people track those extra payments and their mortgage reduction progress.

Since then a lot has changed, and in the last few years I have seen hundreds of ads claiming they can save you thousands of dollars on your mortgage by converting it to a bi-weekly mortgage. I get e-mail from people every day asking me about these services and why my software does not support bi-weekly mortgages. I'd like to answer that question right now. Mortgage Minder doesn't support bi-weekly mortgages, because for the most part, they don't exist. Mortgage Minder does support a simulated bi-weekly payment plan, which is most likely what you will be buying if you use one of those bi-weekly mortgage services. Hopefully this document will show you why I make these statements and will answer some other questions you may have about bi-weekly payment plans and the companies that offer them.

First of all let me tell you, I am not a financial expert, and I don't play one on TV. But, I have been reading and writing about mortgage reduction strategies for many years and have built a small business around that passion. A small business that provides the tools and information necessary for people just like you to plan and implement a do-it-yourself mortgage reduction strategy. I have worked hard to build a trust with my readers and software users and would not intentionally mislead them in any way. In fact I want you to verify everything I am saying here. Search the web, read the information, ask the questions. I want to provide you with the most accurate information possible to help you get started. But in the end, make your own decisions about your mortgage and your money. I also want you to buy my software; that is one of my main goals here and I make no apologies for that. My software and the income it produces are the reasons this site exists, and I truly believe Mortgage Minder can help you with your mortgage reduction strategy. But even if you choose not to buy Mortgage Minder, the information on this page will benefit you, so please read on.

With that said, let's move on..

What is a Bi-Weekly Mortgage Anyway?
Technically, a bi-weekly mortgage would be a mortgage where interest is calculated every two weeks instead of once a month.
I have heard they exist, but I've personally never seen one.  And there is a very good chance that the mortgage you are paying right now is not a true bi-weekly mortgage.  One source of confusion for a lot of people is they confuse a bi-weekly mortgage with a bi-weekly payment plan. They are two totally different animals. This confusion is compounded when the companies offering a bi-weekly payment service enter the picture. They are the ones making claims like:

  • Save thousands in interest.
  • Build equity three times faster.
  • Pay off your home early.
  • No refinancing.
  • No credit check.
  • No increase in you current payment! This one kills me, it's a flat out LIE, but some actually make this claim!

To complicate things even more, a lot of these services are sold via telephone and the person on the other end of the phone may not even have a clue what they are talking about, they are just reading a script.

Now, lets take a look at how this all works. Grab a pencil, paper, and something with caffeine or lots of sugar, this gets a little dry! To make calculating easy, lets say your current mortgage payment is $1,000.00 each month. This is the principal and interest amount only; we don't care about taxes and insurance for these calculations since they have nothing to do with, and do not affect, your loan balance. So assuming you pay $1,000.00 a month; that is equal to $12,000 a year, right?

Here is the way the bi-weekly payment plan works. Instead of paying $1,000.00 every month, you pay half of that, or $500.00 every two weeks. The result? You save thousands in interest, build equity faster, cut the term, etc., etc. Just like they said you would, and you didn't have to refinance, so your credit had nothing to do with it. The one part that is NOT true is the part about your payment not increasing. Take a closer look at what just happened. If you pay $500.00 every two weeks and there are 52 weeks in a year, that means you will make a total of 26 payments of $500.00 each, or $13,000.00. Wait a minute! Paying monthly, you only paid $12,000.00 a year in principal and interest payments, but on the bi-weekly schedule you are paying $13,000.00 a year. That's like making an extra payment every year, and that is why it cuts the term and saves you money in interest, not because you are paying more frequently! In fact the frequency of the payments has NOTHING to do with it in most cases, because as you will see in the next section, your bank is still getting paid monthly!

Looking a little closer at these bi-weekly payment services, you will find that even though they have you pay them every two weeks, your mortgage company is still getting paid monthly. The way most of them work is like this:

  • They deduct your bi-weekly payment ($500.000 in the example above) automatically from your checking account every two weeks and deposit it into their account. When your monthly mortgage payment is due, they pay it. This goes on for six months, at which time you have made 13 of these "half" payments, which equals 6 and one half monthly payments. So when they pay your sixth monthly payment, they also send in the extra half payment to be applied to the principal amount. And the whole things starts over again for the next six months. They then do the same thing on the twelfth payment. Some of these services actually wait until the twelfth payment and pay a full extra payment for you. You might hear this called a "half every six" or a "full every twelve" method.

**** There are two very important things to remember here. ****

1. It is the extra principal payment amount that reduces or accelerates your mortgage, NOT the payment frequency. (If you get nothing else from this entire site, remember this)

2. You are paying extra principal payments when you use a bi-weekly payment service, and guess who has the use of your extra payments until they decide it is time to send it to the mortgage company. Not you!

You didn't need to refinance, because your mortgage hasn't changed. And since your mortgage didn't change, why would you need a credit check. These guys put a lot of emphasis on these points to make you think they are tightly associated with your mortgage company and to make you feel like you are getting a special deal, a one time only opportunity! In some cases, the only contact they have with your mortgage company is when they send your payment to them every month. And as far as your mortgage company is concerned, they don't really care who pays them as long as they get a check and the account number to apply it to. There is a good possibility that the mortgage company has no idea who these people are and doesn't care. I have heard of situations where the mortgage company was somewhat affiliated with the bi-weekly payment service. They were actually getting kick backs on the fees you pay to sign up for the service. These would be especially annoying since the company is going to claim close affiliation with your mortgage company, but when you call the mortgage company, they are not aware of any such an arrangement. I have also heard of mortgage companies themselves offering a bi-weekly payment service, but guess what, the payments are still applied monthly.

I hate to break the news to you, but I think you already know anyway; there is no magical way to pay off your mortgage early without paying more each month than you do currently. You will have to make your own "special deal" using your knowledge of how the system works.  I don't care if you make bi-weekly, weekly, or even daily payments, if your mortgage is amortized monthly (and it most likely is),  you will not pay your loan down any faster until you add some extra money each month.  I absolutely promise you this is a mathematical FACT!. But don't worry; you don't have to come up with a bundle each month to make a big difference. Download the demo version of Mortgage Minder and take a look at how much you will save by sending in an extra 30 or 40 bucks each month. I think you will be amazed, I am still amazed every time I run a report for someone, and I have been doing this for a long time. Remember, 30 bucks a month is only $360 a year, how much do the bi-weekly mortgage services cost? Why not keep your money and make the extra payments yourself? On a typical $100,000 mortgage that $30 a month for the first 12 months will save you over $3,700 in interest and cuts the term by four payments, and that's if you never pay anything extra after that! If you keep paying the $30 every month, you will knock 4.25 years off the term and save over $29,500 in interest! Download Mortgage Minder right now and see for yourself!

Do it Yourself and Save!
FACT - You can pay additional principal payments all by yourself. You do not need permission from anyone, or assistance from one of these companies. You don't even need my software, although I think you will find it more than helpful and well worth the modest price. Don't take my word for it though, pick up the phone right now and call your mortgage company. Ask them if you pay an additional amount each month, will they apply it to the principal. Then ask them if it will significantly reduce the amount of interest you will pay over the term of the loan. I'll bet the answer is yes on both counts, in fact I know it will be. It is always a good idea to make a quick call to your mortgage company anyway to let them know that you are making additional payments and that you want these payments applied to the principal, not escrow just so there is no misunderstanding. Always check your statement to make sure it was applied properly.

FACT - Companies like the ones mentioned above who provide the bi-weekly payment service can charge from $125 to $750 or more just to set you up. On top of that, some charge an additional $2 - $8 every two weeks as a transaction fee.

FACT - Most mortgage companies will not accept a payment that is less than the regular, minimum payment amount, but they will accept an extra amount without hesitation. Call your mortgage company and ask them. This is proof that these bi-weekly payment services are taking your money on a bi-weekly basis and paying your mortgage monthly. You can pay any additional amount with any monthly payment. All you need to do is decide how much extra you can afford or figure out when you would like to have the mortgage paid in full. Maybe you want it paid off just before the kids go off to college, or maybe right before you retire. You get the picture.

FACT - With Mortgage Minder software, you can select the payoff date and it will tell you how much extra you will have to pay each month to pay off your mortgage by that date. It will then allow you to track your progress on as you go.

Special Note - Although I do not agree with the way most of the bi-weekly services are promoted and presented, I am sure there are some of them out there that are very up front with you about how things work. In some situations, where people do not have enough self-control, using a service like this to control the process may be just what the doctor ordered. In fact, if you stick with it, the amount you save in interest could be well worth the initial investment, but if and only if you cannot accomplish the same goal on your own. Also, it is important to note that some of these companies also claim to audit your year-end statement from your mortgage company. It is possible that your mortgage company may have overcharged you for something and owes you a refund. This is most common with variable interest rate loans. Did I mention Mortgage Minder supports variable interest rate loans? And did I mention that even if you decide to use a bi-weekly payment service you could still use Mortgage Minder to track your progress.


Mortgage Minder Software Can Help!
I designed Mortgage Minder to calculate the effect of making extra principal payments. So for those of you that have ask why it does not support bi-weekly payments, I think you know the answer now. The truth is, it does support the bi-weekly payment structure described above, I just don't call it bi-weekly anything, and now that you know how it works, you can customize a plan to fit your needs and call it whatever you like. Once again, most bi-weekly payment plans are actually monthly payments with an extra principal payment every six or twelve months. Using Mortgage Minder, you can easily simulate this by adding an extra half payment every six months or an extra full payment every twelve months.

Mortgage Minder was designed for people like you and me, not for mortgage professionals who can calculate this stuff in their sleep. Mortgage Minder is very powerful and feature rich, yet easy to use and understand. It lets you know instantly, and in plain English how much you will save using a certain payment plan. You can even save several different plans to compare savings potential or save different loan information for multiple properties. You can print reports, compare payment tables, calculate a certain payoff date, add a single extra payment or automatically repeat an amount every so many months. Mortgage Minder supports US and Canadian calculation methods and fully supports variable interest rate mortgages. Download the demo right now and give it a try! We all have software to keep track of addresses, taxes, bills, pictures, our health, our schedules, our kids, our pets, and anything a person can think of to collect, and even more software to print labels, write checks, send faxes, chat with people you don't even know, etc., etc. Isn't it time you had software to help you manage what was probably the single biggest purchase of your life, software that puts YOU in control of your mortgage reduction strategy? Software you will use today, next month, and next year. If you start a plan today and stick with it, your small Mortgage Minder investment will still be paying off several years from now in the way it allows you to track and print your progress over the years. If you move or get a new mortgage, Mortgage Minder is ready to go, just type in the new loan information. Mortgage Minder keeps you motivated when you track your progress, it's easier to continue when you can see the results. It is very important to get started ASAP. The longer you wait, the less you will save! Get started NOW!

I have given you all of the information you need above to avoid the bi-weekly payment services and save thousands in interest by paying additional monthly principal payments yourself. You do not have to have Mortgage Minder, but if you are serious about a mortgage reduction strategy whether you use a bi-weekly payment service or not, I think you will find it to be an invaluable tool at a very modest price.

Tens of thousands of users since 1995 have discovered the benefits of using Mortgage Minder. Isn't it time you do the same? I get email from users all the time, some of them have been using Mortgage Minder since the first release. If you are serious about planning and implementing a mortgage reduction strategy, you will use and keep on using Mortgage Minder. Or, if you are just kicking the idea around, Mortgage Minder is still well worth the price to give solid, easy to understand, accurate, answers. It is not one of those programs you use once and then never go back to (you know the ones I mean).

Mortgage Minder comes with a 100% money back guarantee. If you are not completely satisfied for any reason, remove it from your system and I will refund 100% of the purchase price, no questions asked. You have nothing to lose.

Download the fully functional trial version and give it a try.

Then, when you are ready you can purchase Mortgage Minder on-line using your credit card and get a code to unlock the demo version instantly! No waiting for the UPS truck, you get it NOW!

Please feel free to send your comments on the above text to feedback@mortgage-minder.com or complete the form below. Your feedback is very important and greatly appreciated.

 

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