My stepbrother is starting to work for a mortgage refinancing company soon. He was trying to explain his companies angle, and it wasn’t really getting through too well. He kept talking about bi-weekly payments, and shaving years off one’s loan.

Here’s what I figured out, the rest is not totally clear.

Take a monthly mortgage payment of $1000, over 12 monthly payments one would have paid $12,000. If one paid $500 every two weeks instead (52 weeks in a year, 26 payments), one would have paid $13,000 after one year. In essence, it seems that every year, you would be 1/12th of a year closer to final payoff, and for a 30 year mortgage you would shave 2 years and 2 months off of the total payoff time. To me this seems like just paying off the loan a bit faster. He claimed that it takes 23 years of payments on a 30 year loan in order to get to the halfway point. He also claimed that they could in effect shorten a 30 year loan to a 23 year loan. :dubious:

He kept talking about saving hundreds of dollars per month in interest, and the savings being applied towards the principal. He really didn’t explain this part.

The people he would be pitching this to have at least $40,000 of revolving and some other type of debt combined. They also have a minimum credit score of 640 I think.

He said “If you don’t use the bi-weekly option, you’re retarded” ad nauseum. Not a great sales pitch, I know. I asked him "If your system is the end all ,be all of loans, why on Earth isn’t every single person that qualifies using it? He dodged the answer somewhat.

This all sounded like some sort of scam of some sort to me, but I don’t know. My knowledge of mortgages is almost nothing.

So, what’s the SD on this? Does it make sense for certain people? Is it a scam? How does it work?