During the first five (5) years of a traditional thirty (30) year fixed rate mortgage at eight percent (8%), for every dollar of mortgage payment you make to the lender each month, only eight cents ($.08) is paid back to you in the form of loan principal reduction. This leaves ninety-two cents ($.92) in interest that the bank most graciously accepts. To make matters worse, the banks know that most homeowners will sell or refinance their home every 5 years, on average. The sad reality of these two dynamics is that most homeowners will never break through the eight cent ($.08) barrier on their mortgages. Each time they buy or refinance, they start over, paying interest from day one on their new loan. It takes approximately twenty-three (23) years to reach the halfway point where fifty cents ($.50) is paid to principal for every mortgage payment dollar.

One way to turn the table on the banks is to take control of how your payments are applied during the early years of the loan. A way of accomplishing that is through a bi-weekly loan payment with a bi-weekly principal reduction schedule. It sounds complicated but it is really very simple. Unlike most bi-weekly loan payment programs that only reduce your outstanding principal loan balance every 30 days a bi-weekly loan payment and principal reduction schedule reduces your outstanding loan balance every 14 days. This is known in the financial world as a 14 day re-amortization period. By having a lender who is willing and able to re-amortize your bi-weekly payments every 14 days, you can reduce your interest expense by as much as forty percent (40%) over the life of your mortgage loan and pay off a typical thirty (30) year mortgage in about twenty-three (23) years. The results are impressive, however, there are points are to keep in mind.