Extra mortgage payment can be simple, cost-free

Q: My wife and I want to pay our mortgage biweekly — instead of monthly — with a personal check. The lender insists, however, that we make a monthly payment or a biweekly electronic bank draft.

We want to reduce the total interest payment on our 30-year fixed-rate mortgage. Can we get our way, or does the lender have absolute power over the frequency and method of payment?

Would we save more over the long run making two payments each month or a 13th monthly payment?

When making an extra payment, should it be applied to the principal or escrow?

A: Mortgage-service companies are set up to handle monthly payments. Handling more payments costs them money.

The many "services" that offer to save you interest by giving you a biweekly payment don't actually make 26 payments a year.

They hold your money and make the equivalent of 13 payments in a year.

Virtually all of the interest savings from a biweekly mortgage plan comes from making the additional principal payment. It does not come from making 26 payments.

The easy and cost-free way to get the effect of a biweekly mortgage payment plan is to divide your monthly mortgage payment by 12 and add that amount to your regular monthly payment.

Most mortgage payment slips now provide a specific line for you to indicate that you are making an additional principal payment.

Q: Could you tell me about the value of Krugerrands? I found three of them in my late husband's things and could use the money. I inquired at my bank, but that's not their thing.

A: Your three Krugerrands are worth about the value of the 3 ounces of gold they contain. Since the price of gold fluctuates every day, there is no way to know the specific value until you go to a coin dealer to sell the coins.

Active coin dealers will pay something very close to the spot value of 1 ounce of gold per coin. Most dealers charge a small premium (typically $16 to $18) over the spot price to buy or sell. You can check the spot price of gold by going to www.bloomberg.com, clicking on "market data," and then clicking on "commodities." You'll find the spot gold price by scrolling down that page.

Questions: scott@scottburns.com