Basic Information on Bi-Weekly Mortgage Plan for Homeowners of Las Vegas Homes

Have you encountered an advertisement proposing to save you thousands of dollars on your thirty-year loan and scratch years off your expenses? With email "spam" becoming more pervasive as everybody attempts to "get rich immediately" on the internet, these advertisements are turning up with troublesome regularity.

The ads promote the "Bi-Weekly Mortgage" for homeowners of Las Vegas homes and for the most part, do not come from a mortgage lender. Exclamation marks accentuate practically every title: No closing costs! No refinancing! No points! No credit check! No appraisal! Save thousands! Cut years off your mortgage!

For homeowners of Las Vegas homes to attain these terrific savings all you have to do is allow half of your mortgage payment to be subtracted from your current account every two weeks. It’s simple. Certainly, there is a little "set-up fee" and also a "transaction fee" with every automatic payment.

Basically, the ads are honest in almost every respect. They are only charging you with some fees and charges in which actually, you can do your own without paying a cent.

The fundamentals:

Typically, homeowners of Las Vegas homes have to pay twelve mortgage fees in one year. Because there are fifty-two weeks in one year, a bi-weekly loan equals 26 half-payments a year. That would result to making thirteen mortgage payments a year rather than twelve. By using that extra payment directly to the mortgage balance as a principal diminution, your loan amortizes more rapidly, calling for fewer payments. The advertisements are true and you do save money.

Potential Problems with the Trust Account:

Since your finances are held in the savings account trust until your loan payment is due, there are possible risks. Not only are your funds held in this account, but so are the funds of everyone else listed in the bi-weekly program. That is a lot of money.

Most probably, there will be no damages.

Nevertheless, if there are accounting mistakes, mismanagement, or even sham, your mortgage payment might not get made. The first clue of a problem will likely be a phone call or letter from your loan lender, but not until after your payment is already late. Since obligation for making the payment lies with you and not the bi-weekly payment company, you may find yourself poking into your personal savings to make the payment directly -- even though the bi-weekly payment company has already gathered your funds.

Afterwards you can solve the trust account problem with your bi-weekly payment company.

The price of the Bi-Weekly loan:

There is usually a set-up charge that is estimated between $195 and $350, depending on how much sales commission is paid to the individual or company arranging the bill for you. You also have to pay for every transaction fee each time there is a deduction from your savings account and occasionally, also when the payment is made to your loan lender. There may also be recurrent "maintenance expenses."

In the meantime, whoever holds the trust account is gaining interest on your money.

Savings of the Bi-Weekly loan:

By making principal reductions using the bi-weekly loan plan, your mortgage will amortize faster, saving you money. How rapidly your loan liquidates depends on your interest rate and when you start paying the bi-weekly expenses.

On a $100,000 loan at today’s interest rate of eight percent, your first principal reduction would probably be a year from now. For example, the principal reduction is equal to one monthly payment ($733.76), you would save $43,852 over the life of the mortgage and pay it off just about seven years ahead of time.

On the other hand, you have to subtract from those savings any sums you paid in set-up, transaction, and maintenance fees.