Most people budget their expenses on their paycheck schedule, either weekly or bi-weekly, not on their monthly income.  Yet, our mortgage payments (like most other bills) are due every month.  By simply aligning the two, you can take years off of your mortgage and greatly reduce your interest paid.

Instead of making your payment every month on the due date, simply make your payment every 28 days.  This will better align your mortgage payment (which is probably your largest bill) with your income and it will effectively accelerate your payments 2-3 days for 11 months of the year.  By the end of the  year, you will have almost made one full extra payment in principle, because you will be nearly 29 days ahead of schedule with payments (30 days on leap years).


A $200k fixed rate 30yr mortgage at 5.5%, (first payment due on January 1, 2008), can save over $17,000 in interest over the life of the loan, and payoff the loan 32 months early, by following this simple payment method.

In addition to the obvious interest savings, budgeting your family expenses will most likely be easier with a 28 day alignment, rather than a 28/30/31 when your payment is due on a particular day of the month.  You will know that your mortgage always aligns with your paycheck, making it easy to remember and budget for.

Try it out on your mortgage by downloading my savings Spreadsheet for Microsoft Excel, and see how much you can save.

Download: 28 Day Mortgage Payment Savings Calculator.xls

NOTE: Before beginning any prepayment program, ensure you lender does not charge prepayment penalties.

Image: roarofthefour [via Flickr]