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Mortgage Questions

October 15th, 2009 at 03:34 pm

I now have a new 30 year mortgage (I wanted a 20 year mortgage, but they are not available for my situation).

I have $93K to pay off. The mortgage company sent me a notice that I can pay every two weeks if I want. The idea being that they will be getting extra payments that way.

What I don't like is they take it out of either your savings account or your checking account. Also, I'm not sure that I want to do it this way. I want to pay ahead on my mortgage, which starts in November. I have the will and know how to pay ahead on principal without using this type of system. Does anyone have any thoughts on the subject?

Posted in Uncategorized | 21 Comments »

21 Responses to “Mortgage Questions”

  1. creditcardfree Says:
    October 15th, 2009 at 03:43 pm 1255621392
    1255621392

    I wouldn't set it up automatic in your situation, because of the reasons you stated...don't want give account access AND you have the will to pay extra.

    I'd go with that! Good luck. Keep us updated. Smile

  2. kdice Says:
    October 15th, 2009 at 04:42 pm 1255624931
    1255624931

    I agree. We just paid ours off early by sending extra payments on our own. Citibank also wanted a fee to put us on the biweekly plan... ummm, no thanks. Sure, it takes a little more discipline, but definitely doable.

  3. wowitsawonderfullife Says:
    October 15th, 2009 at 04:42 pm 1255624935
    1255624935

    There are significant benefits in going bi-weekly. It really will make a difference in the term of the mortgage. But if you are are disciplined enough to put aside extra cash to power pay then I would stay with monthly and save up the maximum amount you are allowed to pay down per year and apply it in one lump sum. Find out what the max percentage is. That will really motivate you and give you a target amount. Good luck.

  4. miz pat Says:
    October 15th, 2009 at 04:46 pm 1255625183
    1255625183

    wow that's a wonderful idea. I can talk to my mortgage banker and ask what the best time would be to make a big lump sum. And I live in California, where we aren't assessed fees for prepaying on mortgages.

  5. monkeymama Says:
    October 15th, 2009 at 05:25 pm 1255627527
    1255627527

    I would never recommend a bi-weekly mortgage payment. They charge you fees for those. It is just about the same as paying one extra mortgage payment a year, or an extra 1/12 every month. Plus, the alternative is much more flexible!

  6. wowitsawonderfullife Says:
    October 15th, 2009 at 05:31 pm 1255627860
    1255627860

    I've never heard of being charged for bi-weekly payments. That's outrageous! It's all automated anyway. I don't think the banks can do that in Canada. I can't imagine paying a fee to make a loan/mortgage payment. I'm shocked. One more thing - check to see if the % you can pay down per year is based on calendar year or your 12 month renewal year. If it's calendar year you might be able to put in a little extra in 2009 though it will probably be prorated. Good luck.

  7. monkeymama Says:
    October 15th, 2009 at 06:28 pm 1255631339
    1255631339

    In the U.S., bi-weekly payment plans are usually rather scammy. (If not always!)

  8. monkeymama Says:
    October 15th, 2009 at 06:31 pm 1255631515
    1255631515

    What's your interest rate, Miz Pat? I can tell you how much to pay extra, annually, to pay off in 20 years.

  9. Lisa Says:
    October 15th, 2009 at 06:45 pm 1255632321
    1255632321

    Read the fine print. My mortgage company offered a program like that, but they charged $5 a month for the service. That was $60 a year for an automatic payment. Hopefully, yours doesn't.

  10. Mooshocker Says:
    October 15th, 2009 at 07:15 pm 1255634154
    1255634154

    HEY!!!!!!!!!!!!!!!!!!!!!!!!!!!! SAY NO TO BI-WEEKLY PAYMENT PLANS. READ MY PREVIOUS POSTS PLEASE!!!!!!!!!!!!!!! You are making 13 monthly payment this why HOWEVER, are obligated to do so AND are charged certain fees in many cases. You can accomplish the SAME thing by pre-paying one extra payment per year!!!!!!!!! PLUS, you are not OBLIGATED to do so!!!!!!!!

    PS - Make sure ALL of your EF, Savings and Retirement contributions are maxed PRIOR to giving more money to your mortgage company. Remember, PAY YOURSELF FIRST. Auto withdraws are not bad (see putting your payments on autopilot), but NEVER bi-weekly mortgage payments. God bless.

  11. miz pat Says:
    October 15th, 2009 at 08:48 pm 1255639708
    1255639708

    I will check my loan documents to see what my rate was (I'm claiming a blonde moment - anything to do with my divorce does that).

    Then I'll post back and let you know.

    And boy - I ain't going with the bi-weekly - that's for sure.

    Thank you guys. You are the best!

  12. CouponAddict Says:
    October 16th, 2009 at 01:14 am 1255655662
    1255655662

    I love having my mortgage automated, it helps for when I know I will be out of town and dont want to have to worry.

    How I did it. 1st I set up a seperate saving account for just my mortgage to pull from. Then I get paid on the 1st and the 15th of the month, so I have a automatic (or you could do it manual) from my main account to my just for mortgage account. Then I set up the automatic payment to the mortgage company from the mortgage only savings account.

    They say you should have 3-6 months worth of expenses in savings so I figure my mortgage savings is my 3-6 month cushion of mortgage expenses. I only have two months payments extra in there now but I plan to grow it now that I am on baby step 3.

    I then can pay extra principle by dropping a check in the mail, or go to their website to make extra principle payments.

  13. miz pat Says:
    October 18th, 2009 at 08:14 pm 1255896892
    1255896892

    Dear Monkeymom:

    I found out my rate is 5.375, which is pretty darn good.

    Smooch.

  14. monkeymama Says:
    October 19th, 2009 at 04:03 pm 1255968209
    1255968209

    Okay, if you pay one extra payment a year (or extra 1/12 per month) you shave off 5 years.

    If you pay an extra $115 per month, you shave off 10 years (+1 month). An annual lump sum of $1400 accomplishes the same.

    Hope that helps!

  15. LuxLiving Says:
    October 19th, 2009 at 09:53 pm 1255989194
    1255989194

    At one point automated wouldn't have worked for us, but the longer we were into our loan and the more stable our financial situation became we went automated and our payment system there allowed us to include an automated prepayment to principal which is what we did.

    Congrats on the new loan - at least now you know where you stand, where before you were just guesstimating. Now you can get down to the brass tacks of creating a great financial future for yourself Miz Pat!

  16. Jerry Says:
    October 23rd, 2009 at 07:49 pm 1256327370
    1256327370

    I like the idea of the 2-week payments and the faster payoff that it leads to, but I also would feel leery about the them access to the accounts like that. I would prefer the insurance of keeping control over the payments, as well. Will they work with you?
    Jerry

  17. miz pat Says:
    October 26th, 2009 at 04:33 pm 1256574831
    1256574831

    I'm definitely going to pay ahead where possible on this loan. I'm going to pay $600 extra principal on my first payment, because I didn't have to pay for October. So I hope that is a good start.

    Ms Pat

  18. LuxLiving Says:
    October 26th, 2009 at 09:52 pm 1256593941
    1256593941

    That's an excellent start. The more extra you pay earlier in the loan the shorter the term.

    Get an amortization schedule and try knocking that thing on it's ear. We cut our 15 year loan to 10 years and a couple of months by constantly prepaying extra principal. Make sure you mark each such payment clearly as going to extra principal and make sure they take it off there. Can you check your new loan info online?

  19. miz pat Says:
    October 27th, 2009 at 08:23 pm 1256675002
    1256675002

    I don't know if they have a website, but it doesn't seem to pop up on google search.

    I did make my extra principal payment with the first bill and had a cover letter with it. They still haven't sent me payment letters or coupon books or whatever it is they use.

  20. LuxLiving Says:
    October 31st, 2009 at 02:35 pm 1256999711
    1256999711

    If you can't find them online at least go in and ask for an amortization schedule of your loan. They may want to charge you a fee for that these days!

    OR, try inputting your loan figures into an online amortization calculator and print that baby up and put it in your loan file. You can go far by paying attention to next month's principal and paying that in addition to your regular payment. What you can do online may be a few pennies off from what their schedule would say, but it's close enough for govt. work.

    A very good read for you would be to go to the library and check out John Avanzini's "Rapid Debt Reduction Strategies". It's Christian based and has lots of good ways to quickly attack that mortgage and other debt as well.

    Go girl!!!

  21. daybyday Says:
    October 31st, 2009 at 04:16 pm 1257005799
    1257005799

    Be sure to mark on your check "Extra payment for principal only" and make sure they don't count it as the next month's regular payment.

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