"What about a biweekly payment option?"

I had a Borrower from Santa Barbara ask…. "What about a biweekly payment option?"

I’m sure there are some appropriate biweekly mortgages. I personally haven’t seen one in a longtime. Here is why you should be very careful regarding these offers….

1) Most of the time (if not all), the payment sent in the middle of the month is held in a “suspense” account (earning interest that you don’t get). When the mortgage company receives the 2nd payment (2 weeks later), your loan balance is reduced and the monthly amortization (principal reduction) calculations are completed. I don’t know of any mortgage company that actually makes the calculation more than once per month.

2) Also, you’re really making 1 extra payment per year under this program! When you send a payment every 2 weeks, you’re giving the mortgage company 26 checks per year or the equivalent to 13 monthly payments. It’s simply 1 extra payment per year. They just make it sound so much better.

3) The last concern (there are more but I won’t go into it) is that some of these programs charge you a fee for this service. You send-in the extra money and they make the payment for you.

Here’s a better idea: Make some extra payments on your own. Twice a year, send an extra one-half payment. This will create a faster pay-off without paying a fee and using a 3rd party. Keep control of your money and do it yourself!

Ken Doss
Senior Loan Consultant
Community West Bank
1501 State St.
Santa Barbara, CA 93105
805/692-4382