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Bi-Weekly Mortgage Payment Services: Scam or Service?


DISCLAIMER: This article addresses a question about general bi-weekly mortgage payment services. This does not reflect an opinion of any particular company/service. Comments below are not solicited; they are the opinions of readers weighing in on their own accord. 



We recently had a customer bring in a postcard he received that got his attention. It said, "You have a mortgage with Amerifirst Home Mortgage and we can help you pay it off early and save you thousands of dollars!" Our customer wanted to know if the bi-weekly mortgage service ad came from us at Amerifirst, because he was thinking about paying for it.


We're busting this myth right now!

You've probably seen the ads as well. Company X  will charge you a fee to help you pay down your loan balance sooner, saving you a ton of money on your mortgage. Sounds great, except for that fee.  What these third party payment services aren't telling you is that they're providing a service you can easily do yourself - for free. 


Would you pay someone to walk your outgoing bills to the mailbox for you? Of course not. That's essentially what's happening here. This third-party service vendor (and let's be very clear - it's a third party, not Amerifirst) offers to take your usual payment every two weeks instead of once a month. Twice a year this results in three half-payments in a month, meaning one extra payment per year. That extra payment, and only that extra payment, is what shaves years off your repayment schedule. So it's the extra month that helps, not the supposed bi-weekly payments. (Read out blog: 5 Alternatives to Paying a bi-weekly Mortgage Payment Service.)


Amerifirst co-founder and president Mark Jones breaks down the bi-weekly payment myth in our short video below. Watch it to learn how you can take years off your loan without paying someone to do it for you. 


You can click here to view the video: Bi-weekly Mortgage Payment Service: Scam or Service? 


Here's an example. If your house payment is $1,200 a month, you divide that by 12 months, which equals $100. Then pay the extra $100 every month ($1,300) when you make your mortgage payment. At the end of one year's time, you've essentially made 13 mortgage payments, instead of 12.  Make sure you tell the lender or bank that you want the extra applied to the principle. Now you've made an extra payment for the year, with no fees and no one having to hold onto your money for you. That's right - these companies hold your money and make the payment for you once a month. If they're late for any reason, it's your credit history that suffers, not the company's credit.


Our advice: avoid bi-weekly payment services and talk to your lender about budgeting the extra payment. You can learn more about buying your first home with our "Get Mortgage Ready Guide".


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Tips for Paying Off Your Mortgage Faster

There are several ways to pay off your mortgage faster and save on interest payments. Even better, not all methods require spending a lot of extra money! Take a look at the list below: Make extra principal payments.  You can pay extra money toward your mortgage balance each month or make a larger, lump sum payment on your principal each year. This reduces the amount due on the mortgage as well as reducing the amount of interest that will accrue. Extra money can also be added to the principal payment from bonuses, gifts, savings and extra earnings. Just remember to make a note on the check for the money to go towards the principal! Make one extra mortgage payment per year. One of the easiest ways to make an extra payment each year is to pay half your mortgage payment every other week instead of paying the full amount once a month, otherwise known as “bi-weekly payments.” With these payments, an extra payment is made so that the total number of payments that one makes adds up to 13 payments in a year rather than the 12 that would have been made with monthly payments. This adds up to significant interest savings over the duration of a mortgage. You also want to make sure that if your lender accepts this kind of payment they will not charge you a prepayment penalty. Also verify that the bi-weekly payments are being applied to the principal amount and not the interest. Otherwise, you won't notice the savings. Reduce your balance with a lump-sum payment. Have you inherited money, earned a bonus or commission, or sold a large item? You could apply that amount to your mortgage’s principal balance. Another option is any time you have a month where you have that third paycheck, apply that to the principal on your mortgage. This will happen twice a year, adding an extra principal payment to your mortgage loan. While paying down a large debt is nice, it's not a requirement. Consider making sure you have enough to work toward other financial goals, such as an emergency fund, before paying more on your mortgage. However, there are many options you can explore that best fit your budget. You can learn more about buying your first home with our Get Mortgage Ready Guide below.


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