Maryland Attorney General J. Joseph Curran is advising homeowners seeking to reduce their mortgage principal by accelerating payments that they should be wary of third-party companies offering the service.
Curran warned that mortgage companies or third-party companies will offer to put homeowners on a new payment plan that will result in the homeowner paying off the mortgage earlier, but will only do so for a fee.
"In some cases, if you use a third-party company that is not sufficiently bonded, you even stand to lose some money if the company goes out of business," Curran said. "Consumers are better off to send additional money toward their principal each month when they pay their mortgage."
Plans offered by third-party companies often ask the homeowner to have their bank account debited every two weeks for half of the mortgage payment. By paying every two weeks instead of once a month, a homeowner ends up making an extra payment each year.
According to the consumer protection division of the attorney general's office, some companies charge up to $550 to set up nTC the plan. It also warns that once a homeowner signs up for the plan, there is no deviation from the schedule; if there is, the homeowner can be subjected to late fees and their right to participate in the program could be terminated.
To accomplish the same goal, the attorney general's office suggests dividing the monthly mortgage payment by 12 and adding that sum to your monthly payments, to be applied toward the principal.
Pub Date: 2/08/98
