Dear Dr. Don,
I have a 30-year mortgage. I want to make biweekly payments. My lender wants to charge me. Is this legal? I have to set it up with them and pay a setup fee and a monthly fee for the service.
-- Arnetta Averse

Dear Arnetta,
You're buying a service -- of course it's legal for them to charge for it. That said, I'm not recommending that you convert your mortgage to a biweekly mortgage. Save the fees and expenses and do it yourself.

A lot of homeowners think that most of the interest savings and the shortened loan term that result from a biweekly mortgage come about because of saving interest expense within the month. That's not the case.

What saves interest expense and reduces the loan term is the fact that you're making the equivalent of 13 monthly mortgage payments each year. Dividing 52 weeks in a year by 2 gives you 26 biweekly loan payments. The biweekly loan payment is half the size of the monthly payment, so you pick up an extra payment each year (26 x ½ = 13).

One of two do-it-yourself options will accomplish the same goal. One way is to make an additional principal payment each month of one-twelfth of the monthly payment.

Another method works for people who are paid biweekly. In such arrangements, you'll have at least two months each year that you get an extra paycheck. Use those three-paycheck months to make an additional principal payment of one-half the monthly mortgage payment.

Either way you end up with the same 13 payments per year. People who get paid weekly have at least four, five-paycheck months in a year. They can make additional principal payments of one-fourth the monthly mortgage payment in those months.

Use the amortization feature of Bankrate's mortgage payment calculator to verify that you can do as well on your own as you can by converting your mortgage to a biweekly mortgage. You can check the latter by using Bankrate's biweekly mortgage payment calculator.

The table below shows an example. Yes, the biweekly has a one month and $563 advantage over the do-it-yourself approach, but not after considering the fees and expenses your lender wants to charge to convert your loan.

Extra payment options

I don't recommend homeowners convert to biweekly mortgages because it reduces their financial flexibility.

People who use the do-it-yourself option can skip the additional principal payment if they find themselves between a rock and a hard place. On the other hand, if you convert to a biweekly mortgage, you've made the payment contractual.

Don't convert. Make additional principal payments instead.

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