Don’t pay a fee to enroll in a biweekly mortgage payment plan

Biweekly mortgage payment plans are back.

“Don’t miss out!” proclaims a pitch from Citibank’s BiWeekly Advantage program. “The BiWeekly Advantage Plan is a convenient mortgage budgeting plan that can help you save thousands of dollars in interest and pay off your mortgage sooner.”

Although many people receiving the recent pitches have never heard of biweekly mortgages, they have been around for decades. They simply got mothballed when consumers were more interested in adding to their debt with home equity lines than they were in paying off their loans faster.

What they do is simple: They divide your monthly mortgage payment in half and then automatically debit your account for those half-payments every other week. Because there are 52 weeks in a year — thus 26 half-payments — you’ve made 13 full payments by the end of the year.

Making that one extra payment annually, which feels relatively pain-free when done through this gradual process, causes you to pay off your loan considerably faster and saves you thousands of dollars in interest.

A consumer with a $200,000, 30-year mortgage at 5%, for example, could pay off this loan five years faster and save some $33,000 in interest by paying biweekly.

That’s a nice long-term savings, and it allows you to build equity faster, manage your budget more effectively — and you never have to worry about forgetting to mail your mortgage payment on time, blah, blah, blah…

But there can be drawbacks.

Although Wells Fargo allows customers to sign up free for biweekly mortgage payments, most lenders charge for the programs. And that’s where it’s tougher to decide whether they’re worthwhile.

Citibank, for example, levies a $375 upfront charge and nicks customers $1.50 for each “transaction” — that’s 26 transactions a year — for an additional annual cost of $39. So assuming that you stick with this program for 25 years, it would cost you a total of $1,350.

That might seem like a relatively small price to pay for a $33,000 savings, but there’s really no reason to pay for these programs.  You can set this up yourself at no cost — and by doing it on your own, you give yourself more options and flexibility.

Simply take one mortgage payment and divide it by 12 and add that amount to each payment and your done.  No fees, no cost, no problem.