Citimortgage customers beware! Citi offers a Bi-Weekly payment program which essentially works like this:
Instead of paying your mortgage payment monthly, you pay it bi-weekly. By doing this, you benefit two ways.
1. You are making payments faster so you owe less in interest.
2. By paying every two weeks, you end up making an extra payment per month, so you pay your mortgage off earlier.
Example. Your monthly mortgage payment is $800 a month. In a year you would pay $9600, or $800 X 12 months. If you paid $400 each week, you would end up paying $ 10,400 for the year.
All good so far. You’ve made an extra payment by stretching it out. And, you’ve saved yourself some interest.
For this privalege, Citi charges you a one time flat fee of about $300 and a small transaction fee each time they pull the payment out of your account. Something they don’t tell you about until you hit the very end of their sign up process.
So what’s not to like?
Without signning up for Citi’s little program, you can do the same thing yourself, without paying any fees. While Citi will not accept a partial payment, you can simply schedule a small payment each week or every two weeks that will do the same thing. Using the above example, here’s how you’d do it:
1. Your monthly payment is $800. You continue to pay $800 per month.
2. In addition, you pay an extra $30.77 every two weeks, or $ 15.38 a week.
This is no different than what you would be doing through Citi’s program. Except, of course, for the lack of bullshit sign-up fees, and the additional monthly service fees for the “privalege” of being a part of the program.
If you don’t have the discipline to make the extra $15 a week payments, just do what I do and schedule the weekly (or bimonthly) payments through your on line banking. Which is also free.
Another advantage, besides saving yourself tons of money and allowing yourself to be a victim of Citimortgage, is that if you have a short week, you can cancel that week’s payment with your on-line banking and keep the future payments going. According to Citi, this is not allowed in their plan.
If you are so strapped that you can’t do the one extra payment per year plan (15.37 X 52 weeks = an extra $800 a year, or, one payment), you can set yourself for a lower amount. You will still cut years off your mortgage and you’ll save thousands in interest, even at a measly $5.00 per week!
There is an icing on the cake when you do this plan yourself. Each additional payment you make costs Citi money in accounting and computer time. I like to send in a random $3.00 payment every so often, knowning it will cost them almost twice as much just to process it.
Finally, remember to check your mortgage papers. Some mortgages do not allow you to prepay more than a certain amount per year, and have prepayment penalties if you do. These are not that common but it pays to check your paperwork first. You’ll still be able to set yourself up on a program, but if you had one of these clauses and you decided to put yourself on an aggressive program, you could be dinged by Citi.
Back in the “old days”, mortgage companies used to offer these bi-weekly programs at no additional cost. Now they are charging hefty fees for something a mortgageholder can do on their own. Don’t let yourself be a victim of another Citimoretgage con!
A Few Final Notes:
Because of the potential profit Citi scams with this ruse, be careful about leaving your personal information when making an inquiry about the program. If you do, whether the inquiry is on line or by phone, you may very well be treated to a sales pitch worthy of the greasiest of used car salesmen.
Some may ask, wouldn’t Citi be doing us a favor by offering this program? Our answer: No! For two reasons. 1. They are charging you fees for a “service” that you can do on your own for free. 2. Many people are unable to stick to these programs because of changing financial situations. So, Citi ends up pocketing a hefty sign-up fee without having to give very much.