Somewhere in the paperwork for your new home is a statement showing what you will eventually wind up actually paying for your house over 30 years.  It’s generally at least twice what you’re financing and could be much more, depending on your interest rate.

Pretty much everyone has heard about the benefits of paying one extra payment per year purely towards your principal.  This can shave 5-7 years off your mortgage and save you thousands of dollars.  It should be fairly easy to do using a tax rebate, yearly bonus or just money saved up over the year.

But there’s usually an easy way to guarantee that extra payment every year.  Ask your lender about setting up automatic bi-weekly payments of half your monthly mortgage payment.  52 weeks a year, 26 half payments, so that means you’re making 13 full payments a year.  Easy peasy.  The caveat to this method is that there will be 2 months during the year when you will need to have enough money to cover 3 half payments, but since you’ll know ahead of time when they’re coming, this shouldn’t be a problem.  That’s not the only benefit of the bi-weekly plan, though.  You’re also shaving interest off with every payment.  Consider this, say your monthly mortgage is 1000 dollars.  Let’s be really optimistic and say that 500 dollars is going towards principal.  On a normal, monthly payment plan that 500 dollars of principal has been gathering interest all month.  On the bi-weekly plan 250 dollars of principal is payed off a half month early, meaning that it’s not gathering interest.  And this happens every month…for years.

Just be sure that every payment is applied to the principal as soon as it’s received, instead of being saved by the lender until the due date.