Although paying off your loan in a shorter amount of time will lead to savings, beware of companies who offer you biweekly payment plans. With hidden fees, these payment plans may not be all they are cracked up to be.
Recently, numerous clients have come to Creekside Mortgage, Inc. expressing that they have received letters in the mail asking them if they would like to switch from a monthly to a biweekly loan repayment plan.
The first thing to remember when getting this type of mail is that your home purchase is a part of public record. Meaning anyone can locate your name, address, how much you paid for your home and who your lender was. If you weren’t aware of this, don’t be alarmed. Just realize that you will be receiving mail from companies who are trying to benefit from your home purchase.
To make matters more confusing, letters may include verbiage such as, “Creekside Mortgage Corp has helped you in providing your new mortgage loan…” which could be read as if Creekside, your mortgage broker, has something to do with the mail that you are receiving.
Not only is Creekside Mortgage not responsible for these letters, Creekside would advise you to be careful when considering such plans. And here’s why:
You don’t need a service to do biweekly payments.
It is true that you will reduce the term of your loan and reduce the amount of interest you pay on the life of your loan if you make more payments. Since the biweekly method works by having you pay every two weeks, a total of 26 payments per year, you are essentially paying one extra monthly payment during a year span.
So, instead of making only 12 monthly payments, you are actually making 13 monthly payments split in half every two weeks. If you can afford to do this, it’s a great deal. But, you don’t need a service or to make any changes to do this – all you have to do is pay extra on your monthly bill.
By cutting out the middle man, you will be able to contribute money directly to your principle and you will be able to determine when and how much extra you want to pay towards your loan. If times are rough for your family, you won’t be forced to make that extra yearly payment that you may not have the money for.
Plus, keep in mind that these companies have something to gain by you using them to switch payment plans. While it may not be readily apparent, they may have hidden fees or other costly reasons for helping you make the switch.
If you have any questions about biweekly payments or have other questions, please contact Creekside Mortgage, Inc. at 360.571.LOAN (5626).