I wish I had found this article earlier and I could have saved myself a 20 minute phone call last week. Nine seconds (yes, I had a stop watch) after Elise and I closed on our house, our loan was sold to Washington Mutual. I learned before buying a house to send an extra payment each year and you can knock seven years off of your loan. I figured we were in a good position to do this because it’s our first house and our first payment was due soon. So I’ve adjusted our budget to where I send our full mortgage payment plus 1/12th of a full payment with a separate check with “Apply to principal” in the memo field each month.
I recently received a letter from Washington Mutual regarding their “Equity Accelerator” program that can withdraw half of our mortgage payment from our checking account every two weeks and knock 7 years off the life of our loan. I didn’t think that I would be making 26 biweekly payments (13 months). I thought it had something to do with compounded interest over two weeks versus a whole month. The payment would be the exact same. I thought to myself: you could enroll in this Equity Accelerator program and continue to send the additional 1/12 of a full payment each month to apply to the principle and reduce the life of our loan to somewhere around 15 years (instead of 30).
I called Washington Mutual and spoke to a very friendly customer service representative who told me that there is $200 up-front fee and a $2/month fee. Had I enrolled then and there, they would have to withdraw a full months payment to cover the following month while the account was setup and then would have to pay my standard mortgage payment at the beginning of the month. That would have been two months worth of mortgage payments plus an additional $200 in less than a month. It might be Spring but my money tree ain’t bloomin’.
I decided against the program because I didn’t see the point in having to pay fees for something that I can do on my own for free.