We refinanced our mortgage in January, and that meant we got a new lender. In today’s mail was an invitation to enroll in the lender’s biweekly payment plan which “does the work” to help me pay off my loan faster by automatically deducting half of my regular monthly payment every 14 days. The way the math works out, I would end up making 13 “full” mortgage payments each year, theoretically without feeling any pain. According to my lender’s calculations, I would pay off my loan 4 1/2 years earlier and save over $34,000 in interest.
Um, no thanks. I can manage that “work” on my own perfectly fine. I’ve planned all along to pay extra principal each month, and now I plan on rolling my debt snowball into the mortgage once my student loan is paid off. That’ll result in the mortgage being paid off 23 1/2 years early and over $100,000 saved in interest.
What really staggered me was the cost of the biweekly mortgage plan. The lender must make a fortune off of anyone who signs up. There’s a $375 enrollment fee, plus a $1.50 transaction fee with each payment. With 26 payments, that’s an extra $39 each year!
I hope no one pays these fees, because they’re outrageous. In these economic times, you’d think lenders would actually just be grateful to have a customer who pays on time!