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Swithced to bi-weekly payments, now one month ahead?

Posted: Tue Mar 26, 2019 3:03 pm
by jpark1982
Late last year I made the decision to switch to bi-weekly mortgage payments in an effort to pay off the mortgage sooner. Scheduled the monthly payments to start being drawn out starting 1/4 and every other Friday they would draw out 1/2 the payment based on our paychecks. Started out fine, then received an email from the mortgage company that a payment was not received and to make a payment, so I scheduled a manual payment on 1/15. After 1/18's 1/2 payment I saw a payment made, then reversed, then unapplied payment applied, then canceled. Took a while to get it resolved. Ever since then it appears that my mortgage is being paid ahead of time. Case in point, my last 1/2 payment was drawn out on 3/15, but it says that my next payment due date is May 1st. When I inquired to the mortgage company, they did confirm that my manual payment on 1/15 paid for January and that I am infact ahead. They gave me the option to request a hold of payments going out and starting on 5/1 and then on 5/15 my payments could be drawn out to pay for May and subsequently my payments would come out on the 1st and 15th of every month. Not sure how having payments drawn out on the 1st and 15th makes bi-weekly payments anymore beneficial than having a full payment on the 1st.

Any negatives to suspending my payments on 3/29, 4/12, 4/26 and just having them start on May 1st? Or should I just leave it alone and not do anything. Part of me is thinking just leave it alone since it's working as is, but another part of me is thinking that the $3,000 or so that I'm paying early would be more beneficial paying for my kid's summer camp tuition. I have no issues with cash flow and I fully understand that I'm not trying to delay paying the mortgage, but was wondering if I should take action or not.

Re: Swithced to bi-weekly payments, now one month ahead?

Posted: Tue Mar 26, 2019 6:14 pm
by miamivice
The only benefit to biweekly payments is that you make 26 half-payments in a year rather than 12 full payments. That translates to making 13 regular payments every 12 months, which gets you ahead by one month per year.

The decrease in interest you pay from more frequent payments is too small to worry about.

EDIT: If you are paying on the 1st and 15th, you won't pay off your mortgage earlier (at least very much). That's still 24 1/2 payments a year.

Where you get benefit is when you pay every other Wednesday. That is 26 payments per year.

Re: Swithced to bi-weekly payments, now one month ahead?

Posted: Tue Mar 26, 2019 7:53 pm
by Needtoknow
If you are trying to accelerate your mortgage by one payment every year, you can do the bi weekly payments which will give you the equivalent of one extra payment at the end of the year or 13 monthly payments instead of 12 monthly payments.

However, I do this. I divide my monthly mortgage payment by 12 and I add that amount to my monthly mortgage payment. It accomplishes the same goal plus more because I save interest on the principal right away. When you do the bi weekly way, you have to wait a full year to get the interest savings of a full payment.

I would suggest this site https://www.mtgprofessor.com/home.aspx

There is lots of information on this site for all mortgage situations and great calculators on this site for you to utilize in any mortgage situation.

Re: Swithced to bi-weekly payments, now one month ahead?

Posted: Tue Mar 26, 2019 8:05 pm
by pasadena
If you're ahead, it means that they have not been applying your payments to your principal (whatever you paid above the regular amount due has been applied to interests.

Check your settings and make sure any amount above the monthly due is applied to principal only.