Let's use a simple example.
If you have a $100,000 mortgage @ 5%, your normal monthly
payment would be $582 (which is $6980/yr). Over the
course of a 25 year amortized mortgage, you will have paid
$174,500. If you cut your monthly mortgage payment
in half ($291) and paid it every 2 weeks (26 times a
year), you would decrease your amortization time from 25
years to 21 years, and save yourself over $12,000 in
And that is on a simple example of $100,000 mortgage.
Imagine if it were a $400,000 mortgage. You would be
saving yourself almost $50,000.
The other reason why these options are so
popular is that if you are paid by your employer on a
weekly or bi-weekly basis, you can simplify your
budgeting by making the payment line up with the way you
Other ways of paying off your mortgage more quickly is to
1) Reduce your amortization
period. If you reduce the payoff period from 25
years to 20 years, you will obviously pay off your
mortgage 5 years faster and save a ton in interest
payments. Of course, the negative is that your
monthly mortgage payments will rise substantially, and
this may cause a strain of your household budget.
2) A second option is simply
to increase the size of your mortgage payments. The
larger the payment, the more of that payment goes towards
retiring the principal.
3) A third way is by
exercising an annual payment option. Most
conventional mortgages contain a clause that says you may
make a once a year, one-time payment of up to 20% of the
principal. So if you have an annual company bonus,
or get a small inheritance, it might be wise to pay down
your mortgage and drastically reduce the principal.
All of the methods above will
help you become mortgage free faster and save you 1000's