For Mark Roberts’ Use: What’s your retirement dream? The answer will vary from one person to the next, but most people agree that retiring debt-free would be ideal. In particular, we often hear pre-retirees say that they would love to pay off their home before this next stage in their lives.

But of course, most home loans come with long repayment terms. The most common mortgage is the 30-year repayment plan, often chosen because it offers the lowest monthly payments and therefore allows the borrower to afford a nice home. But you probably already know that over the life of the loan, you will pay more in interest than you paid for the house itself! Yikes!

There actually is one creative strategy, that can help you pay off your home faster, and help you to pay less in interest. Are you paying your mortgage on a monthly basis? If you switch to a bi-weekly payment schedule, for example a schedule that matches up with your paydays, you can drastically reduce the length of your repayment on that loan.

Why does this work? Because there are 12 months in a year, so on a monthly repayment plan you are making 12 payments each year. Since there are 52 weeks in a year, when you switch to a biweekly payment plan you are actually making 26 half-payments of your monthly amount. That adds up to 13 full payments per year.

It might not sound like a big difference, but making just one extra monthly payment per year can reduce the length of your mortgage by five years or more. Perhaps more importantly, you will save thousands of dollars in interest over the life of the loan.

The really great thing about this strategy is that most people don’t even notice the “extra” payment. Once your payments are aligned with your biweekly pay schedule, you will make small adjustments to your budget. You’ll be better prepared for retirement, without making drastic changes that feel like sacrifices.

It’s important to note that some mortgage companies will charge a fee to switch your payment plan. If so, shop around before signing on the dotted line, because some banks will be happy to refinance your loan without enormous fees. Comparison shopping is often the key to negotiating the best deal for yourself.

As always, contact us if you want to learn more about financial planning. We help our clients locate the resources and strategies that will help them accomplish their unique retirement goals.