Get a biweekly mortgage or make extra payments on your own?

Consumers are more aware than ever of the advantages of a biweekly mortgage. This is a type of mortgage where you make two equal payments per month instead of one. A Biweekly mortgage is great because you end up making one extra payment per year. This extra payment will decrease your principal and over the life of the loan, decrease the amount of interest that you will pay for borrowing the money.

For the average loan, the difference means that your 30-year mortgage will be paid off in approximately twenty years. Today, lenders are eager to help customers switch to the biweekly payment schedule because they get their money back in much less time. As with most loan or credit products, the small monthly deposits plus time leads to a rapid reduction in your outstanding balance.

Getting Started
To set up a biweekly mortgage call your lender or servicing company and ask them to change your payment schedule. Always ask upfront if there are any fees involved. Usually there is one time administrative fee to set up your account. Some lenders will also charge a recurring fee that is added to every payment.

Even fewer lenders will charge both a one time fee and the recurring servicing fee. As long as the exact amount of the charges are stated up front you should still see a significant decrease in your loan balance annually.

Once the fees are disclosed, go back to your mortgage calculator and see if it is worth signing up for your lenders biweekly mortgage program. If not, stick with your monthly payment schedule and pay more than the minimum due on your statement.

Your coupon should have a section where you can describe what to do with the additional payment. If not, write two checks and on the second one, note that this additional payment goes towards the principal only. Unlike, a forced biweekly mortgage plan, you can choose to stop the extra payments at any time.

Lender requirements
Most lenders will require that you sign up for automatic debits from your checking or saving account before you can get a biweekly mortgage payment plan. This makes it much easier for an industry that is trying to cut down on their paperwork, and it decreases the rate of late payments.

A biweekly mortgage can work for you, but watch out for those fees.