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paying monthly vs bi-weekly

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buyhouse36
Regular Contributor

paying monthly vs bi-weekly

We are considering dividing our proposed mortgage payment in half and paying half every 2 weeks rather than monthly. Not for any interest saving, but because its easier for us because of how we get paid. If we set it up with our LO now, will it affect our proposed payment?? Will it increase it, lower it, or no change??

Message 1 of 14
13 REPLIES 13
Lel
Moderator Emeritus

Re: paying monthly vs bi-weekly

Paying every two weeks will lead to making the equivalent of 13 monthly payments a year.  On a 30 year mortgage, this will shorten the length of the loan by about 7 years.
Message 2 of 14
buyhouse36
Regular Contributor

Re: paying monthly vs bi-weekly

WOW!!! Quick response!!!

 

I wish we could use that to lower our payment instead. Our proposed payment is about $50 more than we want it to be. Not a deal breaker, but we had our 'max' in mind and its $50 over that.

Message 3 of 14
Lel
Moderator Emeritus

Re: paying monthly vs bi-weekly

There's really no way to lower your monthly obligation without either 1) lowering your purchase price or 2) lowering your interest rate. 
Message 4 of 14
Anonymous
Not applicable

Re: paying monthly vs bi-weekly

We just closed today and were advised against bi-weekly payments.  It may be just our bank (Chase), but we were told if we do bi-weekly payments that are not automatically withdrawn; they hold the first payment and wait for the second to come in and then pay it in full.  Also, she said we would be charged $2 each extra transaction (by check) which we thought was ridiculous considering we are trying to give them money and they are going to charge us to accept it?  The only way to avoid the fees is to have an automatic withdrawal set up with the bank and that way you have no control if something comes up.  Our officer advised us to just take our principal and interest payment and divide that by 12 and whatever that number is just add to our monthly payment.  This will essentially do the same thing without any added fees, having the payment held (when I send a check I prefer that they be cashed quickly, not held) or automatic withdrawals.  There may be something different if you can make your payment thru your bank online.  I would look into that option.
Message 5 of 14
DallasLoanGuy
Super Contributor

Re: paying monthly vs bi-weekly


@Anonymous wrote:
We just closed today and were advised against bi-weekly payments.  It may be just our bank (Chase), but we were told if we do bi-weekly payments that are not automatically withdrawn; they hold the first payment and wait for the second to come in and then pay it in full.  Also, she said we would be charged $2 each extra transaction (by check) which we thought was ridiculous considering we are trying to give them money and they are going to charge us to accept it?  The only way to avoid the fees is to have an automatic withdrawal set up with the bank and that way you have no control if something comes up.  Our officer advised us to just take our principal and interest payment and divide that by 12 and whatever that number is just add to our monthly payment.  This will essentially do the same thing without any added fees, having the payment held (when I send a check I prefer that they be cashed quickly, not held) or automatic withdrawals.  There may be something different if you can make your payment thru your bank online.  I would look into that option.

 

 

the only problem with that option is the human behavior factor.

90%+ will not stick to the plan.

 

 

Retired Lender
Message 6 of 14
Anonymous
Not applicable

Re: paying monthly vs bi-weekly

My mortgage is thru Chase and I can schedule 'transfers' into the Mortgage account without any fees associated to it... You can specify if the transfer is to be paid against Principal, Interest, escrow, etc...

 

Let me know if you have questions about doing this Chase online .

Message 7 of 14
Anonymous
Not applicable

Re: paying monthly vs bi-weekly

My mortgage is with Citi and they offer The BiWeekly Advantage Plan  they charge a one time $375 fee and $1.50 fee for each draft.  You make one extra payment a year on this plan.

 

Since I am cheap Smiley Wink and dont want to pay the fees (over $1250 over the life of the loan) I opened a separate savings account.  My paychecks are electronically deposited everyone Friday and I have my bank account set up to auto transfer half of my mortgage payment into that savings account.  I dont use that savings account for anything other then saving a mortgage payment so there is no temptation to "borrow" from it.  Once a year when the extra money has accumulated in the account I will include the extra payment into my monthly payment.

 

All of the transfers are electronic so it is basically the same as their plan without the fees.  I may earn a couple bucks in interest. 

 

I am about to make my 2nd mortgage payment so we will see how MY plan holds up over the next 30 yrs (hopefully only 23yrs if I stick with the plan)

 

 

Message 8 of 14
Lel
Moderator Emeritus

Re: paying monthly vs bi-weekly


HopefulinIL wrote:

My mortgage is with Citi and they offer The BiWeekly Advantage Plan  they charge a one time $375 fee and $1.50 fee for each draft.  You make one extra payment a year on this plan.

 

Since I am cheap Smiley Wink and dont want to pay the fees (over $1250 over the life of the loan) I opened a separate savings account.  My paychecks are electronically deposited everyone Friday and I have my bank account set up to auto transfer half of my mortgage payment into that savings account.  I dont use that savings account for anything other then saving a mortgage payment so there is no temptation to "borrow" from it.  Once a year when the extra money has accumulated in the account I will include the extra payment into my monthly payment.

 

All of the transfers are electronic so it is basically the same as their plan without the fees.  I may earn a couple bucks in interest. 

 

I am about to make my 2nd mortgage payment so we will see how MY plan holds up over the next 30 yrs (hopefully only 23yrs if I stick with the plan)

 

 


More appropriate adjectives would be "smart" and "disciplined".  Smiley Happy  Fees for the privilege of paying biweekly are a scam.

Message 9 of 14
Anonymous
Not applicable

Re: paying monthly vs bi-weekly

Unless your savings rate is equal to your mortgage rate it seems like you would still be loosing out on some compounded intrest over the year.  Can you have a portion of your paycheck applied directly to your mortgage?  Probably not, but could be worth an inquiry, considering you said you were "cheap" - a.k.a. smart with money/
Message 10 of 14
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