Mortgage Payment Accelerator or I'm an idiot

[Ravenman]

@elbows

It does save you money over the long run. Big money in interest. Because the amount you owe drops biweekly instead of monthly. I’ll let someone else explain it better. But there was no fee or intermediary, we just selected it when we mortgaged. We could also have chosen weekly payments. The amount we paid monthly didn’t change either way!

The amount you paid yearly most certainly did.

[IvoryTowerDenizen]

@Doctor_Jackson

One easy way to accomplish the same thing while still paying monthly: divide your monthly payment by 12 and add that amount to each payment. for a $1,000 monthly payment that comes to an additional $83.33 per month. Go ahead and go really overboard, round up to $84!

Do, as mentioned above, make it clear that the additional payment amount is to be applied to principal.

That’s exactly what I did. What noticed was the third party services were also offering to set up an automatic deduction bi-monthly, which they charged a fee for. This was before online banking was popular. I can set that up as well, for free, so today it really, really makes no sense if you can do the math and remeber to add the extra on yourself or make the bimonthly payment.

[Cumberdale]

@ratatoskK

We got sucked into one of those schemes a few years ago. The advertising was totally deceptive, and, like you, I thought it meant we’d have 2 payments per month rather than one. But in reality it was adding an extra payment!! Plus as I recall there were service charges.

We argued vehemently once we found out what the scheme was, and they kindly cancelled the arrangement.

It was truly a deceptive ad and I think it should be illegal.

I agree, it’s very shady. The worst part however is I like to think I’m careful and able to avoid such schemes. I roll my eyes at the Nigerian scam emails and other similar attempts to separate me from my money and often wonder how people can fall for such stuff. Unfortunately, my BS meter failed me on this one.

[IvoryTowerDenizen]

@Cyros

Count me as another Canadian that is surprised that this would cost extra. Canadian banks offer biweekly payment as a matter of course with no extra fees. Chalk one up for the Big Five!

Our American lenders and all banks I’ve done online banking with will do this for free as well. It’s the third parties that try to get people to pay.

[ftg]

We paid down our mortgage early by paying more. In our case, the mortgage owner’s default assumption was that any extra amount went towards the next payment. Not towards principal. (E.g., if you doubled the Jan. payment, they count it as Jan. and Feb. The payment you made in Feb. would then be viewed as the March payment, etc. This doesn’t decrease your total interest payment much.) We had to mark something on the payment slips that the extra went towards principal. (Not sure how this works in the world of online payments.)