1. Take your monthly payment and divide it in half.
2. Pay each half every two weeks.
This method can help you pay off a 30 year mortgage in 25 years. Or a 6 year car loan in 5 years. It also works on personal loans.
But, there is a potential catch.
Make sure your lender will apply the payment as soon as you send it in. Some lenders will keep the payments in a “holding” account (often a savings account) until the loan payment is due. If your lender holds the money, the magic cannot happen. You could end up with a large balance in the holding account and not paying down your loan.
Also make sure your loan does not have a pre-payment penalty for paying off the loan before the original due date.
So, how does this work?
If you have ever looked at the amortization chart that came with your loan you will see (1) a lot of numbers and (2) that interest is charged each month based on what the principal is at this time.
This is why the amount of your payment applied to principal starts as a little number and gets bigger while the amount applied to interest starts big and gets smaller. These numbers tend to be almost equal around 2/3rds of the way through your loan, which means you are paying mostly interest for the majority of your loan.
By paying bi-weekly, one payment goes entirely to principal so that the amount you are charged interest on (your principal) is lower. This means less interest is charged each period, which can add up to tens of thousands of dollars over the course of your mortgage.
If you want to see how this would work on your loans, check out mortgagecalculator.org and play with the numbers. This is a free calculator and I use it all the time.