Semi Monthly Mortgage Payment ?????

[Anonymous]

I was just wondering if anyone can shed some light on the pros and cons of a doing a semi monthly mortgage payment. It seems like a great deal for anyone that is able to make 2 payments a month using direct deposit, but when things are that good I get a little paranoid. There is 399.00 one time fee for setting it up. Scam or not?????

[Anonymous]

Not sure about the fee, you should be able to just do it on your own I believe.  I could be wrong on that.  You should be able to just set up a twice monthly withdrawl through ACH to the payment center for your mortgage. 

That said, even at 399 fee, it ends up a good deal.  You will end up paying alot less interest and therefore pay the house off much quicker.  There is no magic to it, it has to do with cutting out a little interest every month.  Then , every month you pay down your interest naturally drops anyways.  So you are basically getting to the priciple of your mortgage alot faster.  In a normal payment, you may only pay 10%-20% of your initial payments to principle.  Doing it this way, more goes to principle.

[MattH]

http://mtgprofessor.com/A%20-%20Biweekly%20Mortgages/Do%20you%20need%20help%20to%20repay%20early.htm

[demi]

I do bi-weekly (so I get an extra payment in every year)..not sure if you mean that or just two payments a month.  In any case, Wells Fargo does it for free.

[Anonymous]

My mortgage company offers this service only with direct withdraw. In addition they charge a $4.00 service charge on each payment so If I end up going this route it will cost me an extra $104 a year, but the savings on interest I don't have to pay by essentially making an extra payment every year will be well more than that service charge.

Personally I think it's a good thing if your mortgage company offers it as a service, but I'm not so sure if I would trust a 3rd party to keep everything in check.

[Lel]

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@Anonymous wrote:
I was just wondering if anyone can shed some light on the pros and cons of a doing a semi monthly mortgage payment. It seems like a great deal for anyone that is able to make 2 payments a month using direct deposit, but when things are that good I get a little paranoid. There is 399.00 one time fee for setting it up. Scam or not?????

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If this is truly semi-monthly - that is, two times a month, not every two weeks - then this is a lousy deal.  It won't yield any significant savings (if any) over the long term; it just divides your monthly payment in two.

A biweekly payment plan, on the other hand, makes the equivalent of 13 monthly payments a year.  Doing this from the start will knock about 6 years off the life of a 30 year fixed rate loan.

However, you shouldn't have to pay any fee to experience the benefit of biweekly payments.  You can do one of two things:

1. Make a single extra mortgage payment each year; or

2. Divide your monthly mortgage payment by 12 and add that amount to your regular monthly payment.

Both of these will yield roughly the same benefit, though option #2 will reduce the life of the loan by a couple extra months, I believe.

The nice thing about not having a formal biweekly payment plan is that if you ever get into a situation where the extra payment is too much, you can simply stop paying extra.  If you have a defined biweekly plan, you'll have to go through some hoops (and presumably some additional fees) to revert back to a monthly option. 

[DallasLoanGuy]

setup fee sucks.

but it is still a fantastic deal.

1/2 pmt every two weeks = 13 full payments per year = 7yrs cut off the end of your 30yr note.

nuff said.

[n2win]

You can just add extra for principal to your payment every month for no extra fees and no consequences if you're in a bind (you do have to be disciplined to do this)

In my case, I refinanced in June and have paid an extra $200 toward principal each payment.  Instead of 29.5 years left to pay, at this point it is 28.5 years!

At this rate I will pay off my 30 year mortgage in a little under 15 years, and save over half the interest.

[Anonymous]

"""I was just wondering if anyone can shed some light on the pros and cons of a doing a semi monthly mortgage payment. It seems like a great deal for anyone that is able to make 2 payments a month using direct deposit, but when things are that good I get a little paranoid. There is 399.00 one time fee for setting it up. Scam or not?????"""

Doubling your monthly mortgage payment would turn a 30-year note into a 10-year note, so I'm guessing you're asking about a bi-weekly payment.   To me you shouldn't need to pay a setup fee, So I'll call that a scam. 

That said,  I setup bi-weekly payments with my Wells Fargo mortgage and I didn't realize they weren't going to credit the bi-weekly payment when received, In reality they hold the first bi-weekly payment till they have enough to make the monthly payment, then they credit whatever is in the payment que to make the monthly payment,  in my case that's usually the 5th of the month.  So, WFC is holding half my monthly payment in limbo for two-plus weeks, and paying themselves late when they do as my due date is the 1st.

The 'extra' payment  is made when they credit the orphaned half of one payment when there are three pay periods in the month.

After I saw WFC wasn't crediting the payments bi-weekly, I ran the numbers thru a mortgage calculator and figured out we're better off increasing our monthly payment by 1/12th in the long run, IF you have the disciplne to do that you'll save a little more in interest, depending on the size of your loan that could be several hundred or several thousand dollars.

[Anonymous]

you shouldn't pay a fee for this 'service'.  you can make the payments yourself, set up through your bank, credit union, etc, and not pay any fee.  you can set up a bi-weekly payment or an extra monthly payment (principal only),