So when we first bought our place, we were inundated with offers for a whole bunch of crap.  Including a biweekly withdrawal for our mortgage payment.  Which sounds great, because ultimately, you end up making a whole entire EXTRA payment on your mortgage each year that is entirely principle.  Which, for us, is huge.  And if you have a nice 30 year fixed mortgage, you can shave off years of your mortgage and save literally thousands (if not tens of thousands) of dollars in interest.

So I took the bait and inquired as to how the process worked.  For a fee of less than $5 every biweekly period, the administrator of this program would draw out half your monthly mortgage amount out of your account.  AUTOMATICALLY!  No thinking/remembering on your part.

Sounds like a good plan… except that mortgage interest is calculated on a monthly basis.  So the administrator can only make a payment on your behalf on a monthly basis.  And then when you have accumulated enough for an extra principle payment, they also pay that on your behalf.

But wait – why couldn’t I do this myself??  Especially in this day & age of online banking.  So I double-checked my sanity with a mortgage loan amortization spreadsheet (just do a template search in Excel), plugged in my normal monthly payment + extra principle payment every year (or even better, an extra half payment every 6 months), and came to the same conclusion about the wonderful savings the bi-weekly payment administrator could offer me.

Simple answer – I CAN do this myself.  And without paying a $250 initial fee + the $4 biweekly fee.  And earning interest on my money, not this outside company.

To make it even easier, I bank with ING primarily, and you can easily and quickly set up a bazillion accounts:

So each pay period for me (Steve’s payroll is on my payroll off-week, so our household gets paid every week), I funnel half of our monthly mortgage payment amount into the “House” account.  And I set up auto-debit with my mortgage provider, so they just withdrew my payment from this account today.  I have the separate account just so I can easily see how much non-mortgage funds we have in our normal checking & savings.  And in theory, these extra mortgage funds could be used for a household emergency, rather than an extra payment, if need be.

MORAL OF THE STORY: I know a lot of you already have the mortgage thing figured out and set up to your liking, but maybe your friends/relatives just bought their first house, or re-financed recently.  And they have received this offer in the mail.  DON’T let them sign up – they can do it themselves, setting up their own payment system.

And lest you think that smart people wouldn’t be duped by this wonderful offer, well, I almost was, and one of Steve’s co-workers actually was (and this is an engineer – with a Masters degree, I think – working on some secret project that helps ensure the security of our wonderful country – at least, that’s what I assume they’re working on).

ALSO – If any of you are interested in setting up an account with ING (their interest rates are always better than the rates at any of the major banks), let me know, and I can email you a referral – and I think we both get a “referral bonus” when you sign up.