Valley National Bank, a $4.5 billion-asset institution in northern New Jersey's affluent suburbs, has hit pay dirt by offering biweekly mortgages.
Introduced in June to the bank's 10-county market, the accelerated- payment loans have stimulated so much business volume that the Wayne-based institution has had to add to its staff to keep up.
Franklin Bollhorst, senior vice president for residential mortgage lending, said hundreds of applications had been received.
Mr. Bollhorst said the appeal of the loan stemmed from its repayment schedule - every two weeks instead of monthly. This results in the equivalent of 13 monthly payments a year instead of 12, and significantly reduces the amount of time needed to repay a loan. It also cuts the total dollar cost of the mortgage.
"This extra monthly payment, along with the more frequent application of payments to the loan balance, speeds the loan payoff and adds up to significant interest savings," Mr. Bollhorst said.
The bank is offering automatic deduction of payments from customer checking accounts. The deductions can be timed to the deposit of a homeowner's paycheck, Mr. Bollhorst noted.
Biweekly mortgages have proved so popular among homeowners at times that they have spawned a cottage industry of companies that for a fee provide a biweekly repayment schedule for people with regular monthly mortgages.
Such fee-based plans have stirred controversy because lenders such as Valley National provide the service free, and borrowers can set up an accelerated schedule on their own.
Mr. Bollhorst said the biweekly schedule was available on 25-year and 15-year loans as well as the 30-year mortgage. He said anybody who can qualify for the 30-year fixed mortgage should qualify for the biweekly.