It’s the American dream to own your own home and dreamers will go to any lengths to accomplish this even if it means borrowing thousands of dollars to be paid back over a 30 year period. It’s quite an obligation to make 360 payments month after month with the bulk of the money going toward interest, at least in the beginning.

The interest on an average home over a 30 year period can account for twice the cost of the home. Interest is working against you 24/7/365. Would you not be happy if someone told you that you can pay your debt off much sooner, and shave away several years and a lot of money from what you owe?

It can be done. With a little self-discipline and maybe a quick review of your budget, you can accomplish just that. It’s no secret that paying the mortgage twice a month, instead of only once will save you thousands and pay off your debt years sooner. This plan is also known as the bi-weekly mortgage plan.

Let’s see what would happen if you bought your $80,000 home with a 7% loan to be paid over 30 years. If you divide the payment in half and pay it every two weeks you should save $25,000 in interest payments and reduce the term by 8 years.

That’s quite a deal for the tiny extra work it requires. The higher your loan and interest are, the more money you will save in the end. You’re paying less interest and more on the principal. The extra payments bring down the principal and interest faster.

Can you obtain the same result by assuming a shorter mortgage term? You certainly can. Because payments will be higher with the shorter term, not everyone can qualify. With the bi-weekly plan, you can take control yourself and enjoy the flexibility.

Some companies will set this up for you, and their fees range anywhere in between $100 to $400. Some companies will do it for free, but will charge you a little for each transaction.

Can you do it yourself? Yes, but talk to your lender and read the fine print in your contract. You may have a pre-payment penalty for paying off the loan ahead of time. Some lenders also tack on a service fee each time you make the extra payment.

Banks can also provide you with a bi-weekly calculator to let you determine how much you would save and how soon you would actually own your home. One of the advantages of paying the loan off early is that you will also save on private mortgage insurance (PMI).

If you opt for a bi-weekly payment plan, you will be making an extra payment a year, and that will benefit you greatly. You can accomplish the same thing by making an extra payment whenever you can of any amount. When you do this, write a separate check with a note that states the money should be applied to the principal and not the interest.

Most financial institutions are happy to help you with saving money on your mortgage but it’s up to you to get the financial ball rolling. For about the cost of dinner and a movie for you and your family each month you can be debt free years sooner and save thousands of dollars.

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