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Recently we refinanced our mortgage. With a rate of 3.875% fixed for 30 years, it was just too good to pass up. About a week after the refi closed, we got a letter from our bank offering what it called the EMPP–Early Mortgage Pay-Off Plan.

The letter promised that we could lower our interest rate with EMPP down to 3.22% without refinancing. Wow! Then I read the fine print. The EMPP is a thinly veiled biweekly mortgage payment plan. I was a bit disappointed in the trickery, but I read through the information anyway.

How Biweekly Mortgage Payments Work

First you have to join the EMPP. The cost is a non-refundable enrollment fee of $295. Once enrolled, one-half of your mortgage payment will be deducted from your checking account every two weeks. If you do the math, it comes out to 13 (not 12) payments a year. Because of that extra payment, you pay down your loan faster and pay less interest.

According to the documents my bank sent me, by paying my mortgage biweekly, I’d shave 5.1 years off my 30-year mortgage. And I’d save about .66% on my effective interest rate, or $74,850.66.

So is the EMPP a Good Deal?

My initial reaction was no. Instead of joining the EMPP, I could simply divide my monthly mortgage payment by 12 and add that amount to each monthly payment I make. The result would be the same, and I wouldn’t have to fork over $295 (plus a $1.50 processing fee for each payment deducted from my checking account) to my bank.

But I’m not convinced that’s the right answer for everybody. When I think about financial decisions today, I ask myself how I would respond if a few years from now one of my teenagers was about to make a financial move. In this case, what would my response be if my son or daughter told me they were going to spend $295 to join a biweekly mortgage payment plan?

My first question would be why they don’t just increase their monthly payment instead. I would want them to understand that they can do this on their own without a fee. Once I’m comfortable that they understand the program and the alternatives, I’d want to know why the intend to join the program anyway.

One answer to that question could be that they are concerned they won’t have the discipline to stick with the increased payments if they do it on their own. They may also like to automate their finances, and an EMPP-type program would do just that. With the biweekly program, they feel confident that they will stick to it. And a $295 enrollment fee is nothing compared to the money they’ll save by paying off their mortgage early.

If that was their rationale, I’d tell them to go for it. What matters most is the end result. And if you need to spend $295 to help stay disciplined, it will be money well spent.

In my case, I won’t be joining the program. I don’t need the extra discipline, and I like the flexibility of paying whatever amount I want over and above the minimum payment.

If you’ve joined a biweekly mortgage payment plan, do you think it was a good move?

Author Bio

Total Articles: 1118
Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Article comments


Seems like you made the right move. The flexibility of paying however much you’d like each month is priceless.

If you decide to discipline yourself and double your payment each month, you can still handle financial emergencies if they arose by cutting your payment a little bit. Or if you end up with some extra dough, you can increase your payment.

Adrian says:

I do the bi-monthly payments through Wells Fargo and there isn’t a fee to do it. I wouldn’t do it if I had to pay money to pay them money. And you are charged $1.50 every time you make a payment? I like the bi-monthly payment because you pay down the mortgage faster because the first monthly payment brings down the mortgage amount slightly so you are paying interest on a lower amount.

Kal says:

adrian, you couldnt be more wrong. number 1, bi-monthly is every other month. bi-weekly is what you have, and even IF half the payment were applied early, the interest savings would be marginal at best, which would NOT pay your loan off early, and sorry for being rude, but if you are not willing to spend a 1.50 per debit to save thousands, than you should probably rent. trading pennies to save dollars is common sense. dont be cheap and dont waste peoples time with your mortgage ignorance

Vicki says:

Like Adrian, I pay no membership or monthly fee with Wells Fargo. I started just making my payments on my own every two weeks but found out it could have appeared that I was behind. Then I had them start an automatic deduction every two weeks. It’s not a lack of discipline but it makes my monthly budget more easily managed since I am paid every 2 weeks. I would not pay any kind of fee to do it.

kal says:

“i would not pay any kind of fee to do it”, surprise!!!! wells fargo holds your money in a suspense account and collects interest for 2 weeks on your money, so yes you are paying.

there is a fine line between being frugal and being cheap

Kevin says:

If you join the EMPP you can still make extra payments as you wish and make sure they are paid directly to the principle on the loan. Then you will save much more. I paid off $40000.00 in just under 5 years doing this. We made a concious decision to pay our debt off as soon as possible. It meant a lot of pain (not much entertainment or travel) while we were in the midst of paying it off. However; the freedom we have now and the relative calmness we can have about gas prices has been worth the hurt then.

Jim Astor says:

Business seldom does anything wherein they do not benefit. Either charging an upfront fee or holding your funds from mid-month until they make a single monthly payment. Either way, they benefit from your funds and you reap a minor benefit that you could enhance on your own by increasing your monthly payment. Whether it is government or business, if they say were here to help you, be very suspicious and watch your wallet.

kal says:

well said, but this isnt whats being discussed, the topic is bi-weekly.

Denny says:

When my wife and I bought our first home we had a fixed 30 yr at 9.25% with a down payment borrowed (at 5%) from my parents. Our monthly payment to the bank was a whopping $229.36 per month. We both were out of work less than a year after and quickly fell into arrears. Long story short; we got back to work 28 months later and changed the way we paid. Instead of $229.36 monthly, we paid either 1/4th each week or 1/2 bi weekly (rounded up to the nearest $5.) By doing this we made our final payment a little over 17 years from the origination date. Of course, we periodically paid a little extra toward the principle and toward the end we scraped up every bit we could to put the debt behind us. We used a lot of money saving techniques to save on energy, clothes, food and just about anything else you could think of. We still were able to live well, go out for dinner with three school aged kids once a week and order pizza every Friday night, and do major home improvements and reconstruction. Today we hold the note on the property and the new owners are paying us. Mutual agreement and commitment (teamwork) will get it accomplished better than paying someone else to do it for you.

David says:

We started this bimonthly payment program years ago, and I think it is a god idea, though I do not like the fee either. The ideal would be to pay extra on principal yourself every month, but probably through an automatic deduction.

Susan says:

I had the option of doing the bi-monthly thing, and opted not to. The saying goes that if you make one extra payment per year, you will cut 7 years off your mortgage. What most people don’t realize is the payment only needs to be a PRINCIPLE payment, not a full payment. Get an amoritization schedule and look at the principle vs the interest on the payment. I have paid down 4 years of payments this year alone, and it hasn’t been because I made 4 full payments every month (Couldn’t have afforded that!!), but because I made my regular payment once a month, then put a little toward principle the other 3 weeks. Be sure to designate these payments as principle, though, or they will go toward your next scheduled payment, interest and all.

Billy says:

Hey Kal, you are rude and obnoxious. Get a life.

Sarah says:

We just bought our house with a mortgage held by Wells Fargo and set up an online, automated biweekly payment schedule. Here’s how that actually works (Kal is quite rude, so I thought it might help to have some details).
1. Wells Fargo takes 1/2 of your normal payment every two weeks. You designate the start date of your payment schedule, and they will automatically take the payment from your account on the same day of the week every two weeks.
2. You have the option of designating an additional payment (which is specified as a payment “to principle”). The amount you designate will also be divided in 1/2, so make sure you include the total amount you want to add to your payment.
3. Your partial payment for the first two weeks will not be applied to your mortgage until full payment is received.
4. If you goof and set up your payment plan so that your second payment occurs AFTER the date for your late fee schedule, you will be charged a late fee and your additional payment will be used to pay the late fees.
Note that if you set up your payment schedule so that your first 1/2 payment occurs two weeks before your first payment is due, then your second 1/2 payment will occur on or close to the due date so that you will still be within the no-late-fee window and won’t be charged any late fees.
5. Wells Fargo allows you to change your payment schedule at any time, up to 3 days before the next scheduled automatic payment, so you’re not signing up for a permanent change in your mortgage.

The real savings appears to be in making the extra principle payments and in making 2 additional payments each year. Here is the Wells Fargo explanation: “Choosing weekly or every two weeks will help you pay off your mortgage faster, because withdrawals in addition to the amount needed to cover your monthly mortgage payments will naturally occur 2 – 5 times per year. The additional withdrawn funds will be automatically applied to your principal balance.”

We decided to go ahead and do biweekly payments with extra principle payments because our goal is to have our house paid for before retirement, and this will help us get there while also making it much easier to budget. If the funds will be withdrawn automatically, this because an easier budget line item to stick to when unexpected expenses crop up.

hmag says:

Sarah I would like to hear your experience on how Wells Fargo handles a third payment in case three biweekly payments occur within a statement period / month (this situation occurs about once every five months). Does this third payment get applied to principal, or held as unapplied funds?

I’ve set up a biweekly plan too at WF last month, and what you say is basically true. However, WF still charges me the regular monthly interest charge even though I pay the monthly payment effectively once every four weeks instead of once a month. So, it’s possible you pay the monthly interest charge 13 times per year when on the biweekly plan.

If a third biweekly payment in the statement period is applied to principal only before the statement period closes for that month, the biweekly plan will save you all the money you can and will work as it should. HOWEVER – if a third biweekly payment within a statement period is simply held as “unapplied funds” and used with the successive biweekly payment to pay the next monthly payment in the following statement period, you’re going to lose money on extra interest paid. On my 130k mortgage, I calculated this would cost me over $7600 over the life of the mortgage. Of course there still is the large benefit of paying off the mortgage sooner because you’re sending in about one extra monthly payment per year when you pay biweekly, but you may not get the full benefit (i.e. pay more than you should).

Rather than stay on my biweekly plan and wait until August 2013, which (for me) would be the next time I’d be paying the biweekly mortgage payment three times in a statement period, just so I can find out what WF will do, I’ve decided to cancel the biweekly plan and simply pay the monthly payment plus the effective additional principal that I would have paid on the biweekly plan. This doesn’t cost me any extra or less per month, and I’ll be sure that WF doesn’t ***** me over. I hope I’m proven wrong with all this, because biweekly payments are so much easier when being paid biweekly by the employer.

I highly recommend to pay close attention to how your lender charges interest and allocates your biweekly payments. Your best bet would be to send in a monthly payment that is effectively the same as the biweekly payment, adjusted for one month’s time. This would be for example:

biweekly = monthly / 2
effective monthly = biweekly * (365/14) / 12

or equivalently:

effective monthly = 2.1726 * biweekly

So, say your minimum monthly payment is $1000.00 and your biweekly payment would therefore be $500.00, you’d schedule a monthly payment (not biweekly), sending in an effective monthly payment of $1086.31, which is the $1000 minimum payment + $86.31 of principal only. This will get you all the benefits of a biweekly plan while you pay once a month, and won’t be “financially disadvantaged” by your lender.