SAVE BIG on Your Mortgage

Nov. 23, 2009 — -- A co-worker of mine recently received a sneaky sales pitch in the mail after refinancing his mortgage. The envelope read "Payment Information Enclosed" in red letters, which certainly got his attention; and would get anybody's, right? Plus, the way the envelope was addressed made it look like the letter was from his new lender.

But it wasn't. It was from a company that wanted to enroll him in a service to pay his mortgage every other week instead of once a month. Basically, you divide your mortgage payment in half and send that half every two weeks instead of sending in the full payment once a month.

Paying your mortgage biweekly is a fantastic way to SAVE BIG. But you don't need some company to charge you a fee -- cutting into your savings -- for something you can easily do yourself.

There are real risks to turning over your mortgage money to some random company, and I'll share them with you in a moment. As you know, I've turned my column over to the cause of helping people SAVE BIG in this crummy economy, which is also the subject of my upcoming book. So, first I'll cover the savings, then the scam.

What really outrages me about the come-on my colleague received is that it claims the savings can be achieved "without increasing the amount of your monthly payment." That's not really true.

The reason paying your mortgage biweekly saves you tens of thousands in interest and knocks years off your mortgage is because there are more than four weeks in some months, so you end up paying a little more toward your mortgage when you pay biweekly. You make roughly one extra mortgage payment each year when you use this strategy.