Mortgage Program Worth Avoiding

Q. I have been approached recently by two different companies about a mortgage acceleration program using biweekly payments. I like the idea of paying off my mortgage early, but I am not sure which company to use. Both companies charge the same amount to enroll in the program, about $250. Does it make sense to join? -- J.C .

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A. Quite simply, neither company is offering you anything that you can’t do for yourself--at no additional expense and with absolutely no risk. If you really want to pay off your mortgage before its scheduled expiration, you don’t need the services of a company that will charge you money you could otherwise use to make those payments. Furthermore, you should know that some of these services have less-than-sterling reputations; you should be wary about putting your money and your mortgage obligations in their trust.

Perhaps if you understand what these services really do, you will see why you can live without them. Basically, these companies act as middlemen between you and your lender. They take money from your checking account, usually electronically, every two weeks and pay your mortgage for you. They don’t, however, pay your lender every two weeks. Instead, they make an extra, 13th monthly payment on your mortgage every year.

If you think about it, you aren’t coming out ahead on the deal. Sure, your mortgage is being reduced at a faster pace than it otherwise would. But for most of the year, these services have the use of your money and are free to earn interest on it as it accumulates. Perhaps more important, several consumer advocates point out that some loan servicing companies have skipped town, often leaving their customers with mortgages seriously in arrears. Is this anything you need to pay $250 for?

Loan servicing companies argue that they provide consumers with a service by offering a more disciplined way of accelerating their mortgage payments.

The consumer is obligated to the payment program and cannot easily abandon its requirements because he or she suddenly wants to purchase something else once in a while. These companies also note that electronic debiting of borrowers’ accounts reduces the hassle of writing a check each month.

In the end, only you can decide what to do. But with a little self-discipline and commitment, you can save up the money to make a 13th monthly payment every year. Even more simply, you can add a little extra to your mortgage payment each month to reduce your outstanding principal balance.

You can do this at whatever pace and in whatever amounts you want. But talk to your lender first to find out if the company has any special requirements.

You should also keep records of any extra payments you make to ensure that you are properly credited. None of this requires the services of a company that charges you a fee and earns interest on your money.

How to Get a Copy of Your Tax Return

Q. I must get a copy of a previous year’s tax return in order to get a home loan. How do I do this? How long will it take? Is it free? *

R.G.D .

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A. The first step is to get IRS Form 4506, available at local IRS offices or by calling the IRS special forms order line at (800) 829-3676. The IRS says it can take up to 15 working days to receive the form when ordering by phone.

After getting Form 4506, you will see that you can order either complete copies of individual tax filings or a transcript. The complete copies cost $14 each; the transcripts, essentially abstracts of the filings containing most of the pertinent information, are free.

The IRS says the transcripts are sufficient to satisfy lenders, but there is some disagreement about that among mortgage brokers. To be on the safe side, you should get the full copy.

But here’s the downside: It can take up to 60 days for the IRS to return a copy of your tax form. If time is of the essence, you’d be wise to get your request in quickly.

An alternative is to call the IRS taxpayer information hot line. The IRS says you can get certain pieces of information from your tax filings by phone. Of course, your lender may not accept this as absolute proof, but it may be enough to keep the loan process moving along while you await copies of the return.

Call (800) 829-1040. You will need to punch in the Social Security numbers of people signing the tax returns in question.