How does a mortgage accelerator program work?
Through the years I've seen a few different "accelerator" mortgage programs. In a broad definition, it is a program to accelerate the payoff of your mortgage.
The program will put you on a program where you either make payments more frequently than your note requires, or you will be making higher payments than the note requires.
The most popular "accelerator" program is the bi-weekly mortgage. In a bi-weekly mortgage, a payment is made every other week. (usually on Fridays) The payment is set up on an automatic debit from your bank account. The payment will be 1/2 of the normal Principal & Interest payment. Because you are making these payments every other week, you will make 26 half payments which will equal 13 normal payments. This 1 extra payment is what will drive the principal balance down faster than the normal amortization. On a normal 30 year loan, a bi-weekly payment will cause the loan to pay off in roughly 22 years.
Various servicers market these programs under different names. Overall it's a good financial planning tool if you are not disciplined to make a higher payment on your own. You will create the same effect by adding 1/12 th of your P & I payment to each of your monthly payments.
Do not pay a large fee to enroll in the program, and make sure that you can get out of the program if it is creating a stress on your budget. There are numerous bi-weekly calculators available on the web for you to look at the benefit of these programs.
I hope this is helpful. Remember, that if your loan doesn't have a pre-payment penalty, you can manage lump-sum principal reductions on your own. If you do enroll in one of the programs, do it through your mortgage company (not an outside service) and do not do it if there is a large fee associated.