Bi-weekly Payment Plans

Dear MortgageMaster,

I am trying to set up a biweekly payment option on our 30 year fixed mortgage. I am told by my mortgage lender that I must use their outside FNC insurance company to accomplish this which will cost me $375 to set up. Iasked to do it myself through my bill pay option at my financial institution. I was informed I could not. Is it legal for the mortgage co.to demand I use their system and not apply my additional $ paid in the same interest saving manner?

Jon

Dear Jon,

Congratulations on tapping into one of the most powerful and painless methods of paying your mortgage off early...thus, saving thousands and thousands of dollars! Your lender can require you to use their program if you need to use them to set up the bi-weekly program. YOU DON'T!!! Simply take one month's payment and divide it by twelve, and then increase your monthly payment by the 1/12. For example, if your monthly principal and interest payment is $1200, divide it by twelve ($100), and add the $100 to your regular payment ($1200 + $100 = $1300). This achieves the same thing as a bi-weekly payment plan (for reasons I will not explain, it actually works a little faster and better), costs nothing, and is relatively painless. A word of caution, make sure that you note on your payment coupon that you are paying extra and want it applied to principal.

MortgageMaster