Biweekly mortgage program is overrated

Mortgage accelerator doesn’t do anything you can’t do yourself

Numerous companies frequently advertise that they can help you pay off your mortgage in a lot less time. These programs, which are known by several names, including “Mortgage accelerator”, advertise that they can cut as much as ten years off or your 30 year repayment schedule. All you have to do to reap the benefits of their program is to enroll by paying a hefty fee. Is it worth the effort?

These programs are variations on what is known as a biweekly mortgage. The company will charge you several hundred dollars to enroll in their plan, along with a fee every two weeks. By signing up, you agree to let them take one half of your mortgage payment out of your bank account every fourteen days. The plans do work, but not because of any financial magic used by the companies that provide the programs. The plans work because you are paying more money.

There are fifty two weeks in a calendar year. By taking one half of your house payment out of your bank account every two weeks, you are making twenty six half-payments, or thirteen full payments per year, as opposed to the twelve payments you were making previously. By making an extra payment every year, you are paying off your loan principal sooner and reducing the amount of interest that will be applied to the remaining balance. This will, over time, take several years off of the time it takes to repay your mortgage.

Are these plans worthwhile? They might be, but only if you are somewhat lazy. It isn’t necessary to enroll in a plan or pay upfront and monthly fees to take advantage of this method of repayment. Most any lender will allow you to pay extra money at any time. All you need to do is indicate that the extra money is to be applied to the loan principal. Many lenders provide a place on the form that you mail in or use on their Website for that express purpose. You may send in a bit of extra money each month, or you could send in one full extra payment each year. The net effect is roughly the same either way.

What you do not have to do is pay a fee for the privilege. For those people who do not want to take the time to pay extra money each month or each year, a biweekly mortgage plan might be a good solution. The system will be set up automatically and you won’t have to mess with it ever again. Every two weeks, the money will just come out of your bank account. On the other hand, you can probably make the same sort of arrangement with your current lender without having to pay even one cent extra to do it.

If you are interested in making extra contributions towards paying off your mortgage early, all you need to do is call your lender and ask what options might be available to you. You will likely find that any one of a number of free options are there.