Bi-Weekly Again

A few years ago I was getting a slew of letters like yours, about great new plans with names like “Mortgage Accelerator” and “Equity Builder.”

I am sure the plan doesn’t involve payments “twice a month".Read the material again.Doesn't it say "bi-weekly"?That means "every two weeks."A couple of times a year they’d collect three half-payments in one month, on, for example, the 1st, the 15th and the 29th. It'd add up to 26 half-payments, or 13 full payments a year.Your present mortgage would remain in effect.Regular monthly payments are sent in on your behalf, and finally that extra one is sent to be applied toward the principal.

It's that 13th payment that does the trick.Any time you put extra money toward reducing your principal faster than scheduled, you cut down the time on a fixed-rate mortgage.And of course, when you have a smaller debt, you owe less interest.

Yes, you could accomplish the same result yourselves, if you had the discipline to send in a full extra payment every year, on a separate check, clearly marked "to be applied entirely to principal reduction."You could throw in the $400 you didn't spend to join the program, and save even more interest.But for some people, the plan does work well, as enforced savings.For others it nicely matches their salary schedule.

What you don't want to do is try sending in half-payments yourselves.That would confuse the bank's computers and you'd end up with late fees and a messed-up credit record.