Redwood Credit Union First Mortgage Budget Drafting Plan(Biweekly Payments)

What: The Budget Drafting (Biweekly Payment) Plan enables Members who are enrolled in ACH (automated) payment drafting for their first mortgage to have one-half of their payment drafted every other Friday. This can be a convenient, simple way for you to save money over the life of your loan. Smaller bi-weekly payments may also be more convenient for your regular pay cycle, making it easier to manage your monthly budget.

How it works: Members typically make 12 monthly payments towards their mortgage each year. If you elect to make your payments biweekly, you will make 13 monthly payments (composed of 26 half-payments) in advance each year. The extra payment is applied to the principal, which reduces the amount of interest paid over the life of the loan and helps you pay off your loan faster.

Here’s an example: Let’s assume your mortgage is a $200K, 30-year, fixed-rate loan at 3.625%, with a monthly payment of $912.11/month. Using the Budget Drafting Plan will add a 13th payment each year, resulting in 26 biweekly payments of $456.06. As a result of participating in this plan, you will pay off your loan in approximately 313 months (rather than the current 360 months) and save almost $19,000 in interest over the life of the loan.

How much does it cost: The Plan is FREE to RCU Members!

How much does it SAVE: By entering your interest rate, the term of your loan in months, and your loan amount (either new or existing balance) into cells C4 – C6, you can see how much money you can save. After you have entered your data, check the Interest Saved (cell T11) and Month/Year of Payoff (cell T10) cells to see approximately how much interest you will save over the life of the loan and when your loan will be paid in full.

The calculator is located here: Biweekly Savings Calculator (Excel spreadsheet)

To participate in the plan:

1. You must be signed up for ACH payment drafting.

2. You must make one full payment ahead of schedule, as the loan must be paid one month in advance before the plan can take effect. The payment can come from any institution. This advance payment enables you to make two half-payments in advance each month, rather than one monthly payment in arrears.

For example, if you want to begin participating in the plan in April, you would make your April mortgage payment before March 15th. As a result, your loan will be paid one month in advance. When the first half-payment is drafted on April 1st, it will be for the first half of your May payment. The payment drafted on April 15 will be the second half of your May payment.

3. Please sign and complete the Budget Drafting Plan Agreement (pdf), and return it to us at any of the following addresses:

By Email:
Lendingoperations@redwoodcu.org
(Remember to send securely)

By Fax:
707-541-2641

By Mail:
Redwood Credit Union
ATTN: Lending Operations
3033 Cleveland Avenue
Santa Rosa, CA 95403

What to expect:Once you submit your completed Budget Drafting Plan agreement, you will receive a letter from our servicing department (sample enrollment confirmation letter) that confirms your enrollment in the plan, the first drafting date, and the amount to be drafted.

The initial biweekly draft will occur on the first Friday of the month in which the plan begins. For example, if you are eligible to participate beginning in April, your first half-payment would be drafted on Friday, April 1st. One half payment will be drafted every other Friday thereafter, starting April 15. If the scheduled drafting date falls on a weekend or holiday, the half-payment will be drafted the next business day.

Forms:

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