It seems that it would be better just to pay extra towards my current mortgage rather than reformatting it into a bi-weekly mortgage. Am I missing something about an added value of the bi-weekly mortgage? Any thoughts would be appreciated, thanks.
You should contact your lender to learn how they treat additional payments of principal. Some lenders will immediately credit your principal balance, thereby reducing your future interest obligation. I have seen other lenders apply such payments towards the next regular monthly principal and interest payment amount, which does nothing to reduce your interest obligation and in fact increases your cost, since the bank has the use of your money for an extra month.
If your bank takes this approach, then a bi-weekly schedule might be better for you --- faster amortization, less interest owed --- if you can handle the timing. Another approach is to contact the bank prior to making a partial principal repayment, to ensure that your account is credited appropriately. Do not forget to continually re-evaluate your loan terms; as you reduce your balance you may become eligible for more attractive financing than you currently have. Good luck!
There are services available that will manage the process for you for a fee, of course. The idea here is that you send them the money and they forward it along and the timing of it will create a bi-weekly mortgage without having to refinance with a lender to do it.
A bi-weekly in essence is like making thirteen monthly payments each year. So you can create the same effect by dividing one monthly mortgage payment by twelve and adding that portion each month to either your regular payment or in a supplemental payment before the 15th of the month.
I've had clients who for cash flow reasons, decided to make their regular payment (plus a little extra) by splitting it up with part paid on the 1st and the other paid before the 15th. Since they were paid every two weeks this worked for their cash flow. But they have to diligent to make sure that the amounts are properly credited.
Check with the loan servicing department or your mortgage documents to determine the order that payments are credited. Typically, late charges, interest and escrows take priority over any extra payments that you send in unless you specifically indicate it on the payment slip or in the auto debit.
If you have the discipline, I think it best to either create this bi-weekly affect on your own as noted above or by adding an additional amount to each payment.
A biweekly mortgage is just a way for the bank to make extra money. They're going to charge you a fee which is completely unnecessary. Just set up an automatic debit each month for your mortgage + 1/12 of a mortgage payment, and you'll accomplish the same thing. Just make sure that you're indicating that it's an extra principal payment. What I had to do with my mortgage servicer when I had a mortgage was to make two separate payments. One of the payments was the normal mortgage. The second payment was purely principal and indicated as such. Otherwise, they'll ever so helpfully just pay off the interest or advance the payment for the next one that's due, negating the benefits and causing you to sit on the phone for an hour with an incompetent and clueless dolt who can't understand why in the world you'd want to pay off your mortgage early.
Go kill that mortgage as quickly as you can!
I am not a fan of the bi-weekly mortgage programs offered by banks. You can, as others have indicated, create the same payoff schedule by simply sending extra principal payments with your mortgage payment each month. That is, if your goal is to pay your mortgage off early...
I think that everyone should carefully consider whether or not it makes financial sense to pay off their mortgage early, and how that might fit in with (or work against) their overall financial plans. Certainly, there are good reasons to pay off a mortgage, but there are also good reasons to keep a mortgage. I know from personal experience how sitting on a great deal of equity (as a result of paying down the principal early) while not having adequate liquidity can create unnecessary hardship.