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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308519  
Subject: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 5:38 PM
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Good Day All,

CitiMortgage has recently mailed us an offer for their "BiWeekly Mortgage Payment Plan" claiming that it will save my family thousands in interest over the life of their mortgage.

"They draft one half of the monthly payment every 14 days from a checking account. The payments are remitted to Citi on the first business day of each month. The terms of the mortgage stay the same. During the first month of the plan you pay your regular mortgage payment, then 14 days after they will begin the biweekly drafts. Enrollment fee= $375."

We currently have a 5.5% rate on a mortgage in the 150K range.

Fine Print: $10 fee for insufficient funds, will automatically retry if insufficient funds are found, will charge this unpaid draft in the next biweekly cycle; $0.75 transaction fee per draft (0.75 x 26 drafts = $19.50 / year).

Total Cost: $394.50
Total Estimated Savings: ~$10,000
Total Estimated Time Saved: 2 years

Any advice?

IslandFoolin
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Author: aristocatt Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190104 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 5:50 PM
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The reason that it saves you money is that you pay 1/2 month worth every two weeks, so over the year you make 13 monthly payments rather than 12.

Therefore, you can achieve this extra principle pay-down yourself, there is no benefit to their "service".


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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190106 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 6:02 PM
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That's what I was thinking and was telling the folks about.

Now that I go back and am looking at the actual mailing, they even say that you can do it yourself: "Some homeowners try to make extra principal payments themselves but most aren't able to keep a consistent schedule. Let us do the work for you." -Citi

They never cease to amaze.

-IF

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Author: Patzer Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190107 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 6:24 PM
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"Some homeowners try to make extra principal payments themselves but most aren't able to keep a consistent schedule. Let us do the work for you." -Citi

So what's so hard about writing a form letter in Word telling them how much extra principal you're paying, saving it, changing the date each month, and changing the amount when you can pay more? It can be turned into part of the routine of paying the mortgage.

Patzer
who made 102 consecutive monthly extra principal payments before retiring his mortgage

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Author: XCgeoff Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190108 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 6:39 PM
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Now that I go back and am looking at the actual mailing, they even say that you can do it yourself: "Some homeowners try to make extra principal payments themselves but most aren't able to keep a consistent schedule. Let us do the work for you." -Citi


Just consider the $375 a stupidity/laziness fee

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Author: fredinseoul Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190113 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 7:27 PM
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Don't do it. As the other poster said, you can do it yourself. Put the $400 towards either the house, or another debt.

Another point is that even if you do send in an extra payment irregularly, you will still save money over time.

fredinseoul



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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190119 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/22/2004 11:12 PM
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Now that I go back and am looking at the actual mailing, they even say that you can do it yourself: "Some homeowners try to make extra principal payments themselves but most aren't able to keep a consistent schedule. Let us do the work for you." -Citi

The only WORK they do is enter you into their database, collect your fees, and also hold the extra money until the end of the year earning interest on it themselves until they have to make that extra payment for you.

xtn

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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190121 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/23/2004 1:16 AM
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Biweekly payment plans are popular, not because they help consumers, but because they help banks (fees, interest they earn on your money). They are providing a service that you can easily do yourself for free.

And a biweekly plan can cause cash flow problems unless one is really paid weekly or biweekly because one is making 26 "half payments" per year, which translates to two months out of the year one is making three "half payments" instead of two.

The LBYM method is to do it the no-cost way: send 1/12 more than the contracted amount every month (but double-check one won't trip a prepay penalty) or send one extra full payment every year.

Mortgage Professor has a section on BiWeekly Payments:
http://www.mtgprofessor.com/biweeklies.htm

There is no magic: to save money on interest, send as much money as one can at the earliest payment date one can. This is the principal behind snowballing or behind paying off almost any loan early.

Unlike credit cards, though, the vast majority of mortgage servicers are set up to receive only one payment a month or possibly one main payment and a principal paydown check, they aren't set up to accept biweekly payments. Also, earlier in the month won't matter (unlike credit cards) because the interest is calculated only once a month on the monthly balance (not the average daily balance). But otherwise one can snowball the mortgage just like any other debt.

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Author: Booa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190124 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/23/2004 1:55 AM
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Step 1: wrap your arms tightly around your torso so you don't bust your gut when you laugh hysterically at the thought of paying $375 for them to do something you can do yourself.

Step 2: divide your monthly mortgage payment by twelve, and add that amount to your check, or write a separate check with a notation that it's towards principle only.

Step 3: tell all your friends and family this cool trick, and how they can do it for themselves rather than pay anyone else to do it.


IIRC, Citibank is not the first and certainly won't be the last mortgage company to make this offer. And, in a world where people still fall for the Nigerian bank scheme, I guess I can't blame them, but I can point and laugh, right? :-)


--Booa

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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190126 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/23/2004 2:17 AM
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Thanks for all the replies everyone... i pointed out the obvious to the folks tonight and low and behold it worked, they've adjusted their budget to add in the extra payments. Who says lender's junk mail is always junk!

Speaking of Nigerian money fraud, "i'll buy that 1992 mustang off of you for $5,000, just let me wire you some money as a down payment"

Been there, avoided that.

IslandFoolin

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Author: FoolishMicheal Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190127 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/23/2004 3:53 AM
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Booa,

And, in a world where people still fall for the Nigerian bank scheme, I guess I can't blame them, but I can point and laugh, right? :-)

Bank scheme...BWAHAHAHAHAHA! As soon as Ndugu Bwatumgo sends me the confirmation that the $10 Million has been deposited in my bank, you will EAT YOUR WORDS! I am amazed at how many wealthy people with no family are dropping like flies in the Ivory Coast.

Mike
With tongue firmly in cheek

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Author: Booa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190128 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/23/2004 6:09 AM
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Speaking of Nigerian money fraud, "i'll buy that 1992 mustang off of you for $5,000, just let me wire you some money as a down payment"

<Blimpy voice> I'll gladly pay you Tuesday for a hamburger today. :-)

Been there, avoided that.


Yay you! I'm glad you helped out your parents and have avoided that situation in the past. I alas actually know someone who fell for the Nigerian bank scheme, and it's not a pretty picture. :-(


--Booa

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Author: LyonBanking Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190250 of 308519
Subject: Re: BiWeekly Advantage Plan from CitiMortgage? Date: 9/26/2004 3:10 PM
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Long before I became a Fool, I got that very same offer in the mail from our mortgage lender. I discussed it very frankly with my husband, trying to decide whether we wanted to do it or not. (I am so embarrassed to admit that!) We finally decided against it, not because, hello, we can do this ourselves! but for another reason: we had bought our house when interest rates were still up there a little bit (we bought our house @ a 7% fixed interest rate, 30 year loan.) So as we watched interest rates fall, we knew we'd probably refi our house eventually, which wouldn't make the $500 fee (or whatever it was) worth it (by time we would have saved enough to cover the $500 fee, it would have been past time to refi!)

So we passed on the "golden opportunity," refi'd our house at 4.5% fixed for 15 years, and now make the extra payments ourselves (we simply take a portion of the house payment out of each check, then at the end of the month, go into our bank and pay the bill!) Amazingly enough, we didn't even have to pay anybody anything to do this (luckily for us, I had become a Fool since our original mortgage, and when we refi'd. It's amazing what a little knowledge can do.)

So although now I laugh at the thought of paying someone else to do something I can VERY easily do myself, at one point I was sadly considering it. So I can imagine the banks get quite a few takers.

Ahhh....the joys of being a Fool. ; )

Havs

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