I Shaved Years Off My Mortgage in Seconds. Here's How

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There are several ways to drop years off your mortgage and save thousands of dollars. Here, I'd like to tell you about a ridiculously easy step I took to cut nearly five years off my home loan and save a large sum of money that I'm confident will one day come in handy. I'll also touch on a few other ways you can outsmart your mortgage and save money in the process.

My two-second decision

When my husband and I purchased our current home two years ago, one of the things our lender asked was if we'd rather make monthly or biweekly payments. Because my husband is paid every two weeks, I thought biweekly payments sounded awesome.

Besides, I liked the idea of paying half a mortgage payment every other week. Somehow, paying only half made it seem more manageable.

Here's how it works

Let's say you take out a $300,000 mortgage and land an interest rate of 5.5%. Here's how it would shake out -- with and without biweekly payments.

• With a traditional 30-year mortgage, you would make a single monthly principal and interest payment of $1,703. By the time you pay the mortgage off, you will have paid $313,212 in interest.
• By switching to a biweekly mortgage, you would make a payment of $852 every two weeks. By the time the mortgage is paid off, you will have paid $250,957 in interest. That's an overall savings of $62,255.

Here's why it works

• With a traditional mortgage , you would make 12 payments a year (one each month).
• However, since the year has 52 weeks, making a half payment every other week means making 26 biweekly payments.
• Making 26 biweekly payments means you would make 13 full payments yearly instead of 12 (26 ÷ 2 = 13).
• Thanks to compound interest, that one extra payment a year reduces the total amount of interest you'd pay and shaves years off your mortgage.

Fees

Our mortgage company didn't charge us to opt for biweekly payments (which was incredibly cool). However, when our mortgage was sold to another lender last year, that lender required us to pay several hundred dollars to set up biweekly payments. The ultimate savings is so great that it was an easy decision to make.

More: Check out our picks for the best mortgage lenders

If you're interested in biweekly payments, ask your lender about what it takes to sign up. You may find that your mortgage company offers the service for free, or you may be required to pay a one-time fee. Either way, if you do the math and learn that you're going to save a chunk of money, it may be well worth the cost.

Other ways to shave years off your mortgage

If the idea of paying your mortgage off early appeals to you, here are some of the other ways you can make it a reality.

Refinance

When interest rates decline, you can reduce the amount you pay toward interest by refinancing. At the same time, you may decide to opt for a 15-year mortgage , saving you even more in interest costs.

Make extra mortgage payments

As long as your lender doesn't charge a penalty for paying off your mortgage early, pay a little extra each month. Say your regular payment is $2,000, including principal, interest, taxes, and insurance. Add a little extra each month and inform your lender that it should be applied to the principal and not interest . Otherwise, your lender could use it toward future scheduled monthly payments -- a move that won't save you money.

Add one extra mortgage payment annually

Another way to come up with an extra annual payment is by paying 1/12 extra each month. So, if your monthly mortgage payment is $2,000, you would add an additional $167 ($2,000 ÷ 12 = $166.66). Again, inform your lender that you want the extra payment applied to the principal only.

If your goal is to minimize the amount of interest you pay on your home loan, any of these strategies can work. As long as you're not cutting your budget too close to the bone, they're an easy way to whittle away your mortgage.

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