Making an extra mortgage payment each year can save you thousands of dollars and shave years off a 30-year loan.  That extra payment yields the same result as a bi-weekly payment program.  The magic of biweekly payments is based upon the fact that there are 52 weeks in a year.  When your bank account is debited every two weeks, you make 26 half-payments a year -- equivalent to 13 monthly payments.  This extra payment each year on your mortgage will make a big difference.

For example, someone who borrows $100,000 at 6 percent interest for 30 years would pay a shade under $600 a month in principal and interest.  Let's say taxes and insurance bring the monthly payment to a little under $1,000.  By making an extra $1,000 payment every year, a borrower would pay off the mortgage in 22 years, 2 months, knocking almost eight years off the loan and saving about $34,000 in interest.

There are several ways to make an extra payment each year.  You could save up your money and make an extra payment annually.  You could also divide your monthly payment by 12 and send that amount, plus your regular payment, every month, making sure the extra goes toward principal.  Be sure to write a notation on your check that the extra payment should be applied to the loan principal.  Check your mortgage statement each month to make sure that extra payments have been credited towards your principal.

Another alternative is paying a company (Equity Accelerator is one) to debit your checking account every two weeks and automatically make the extra payment for you every 12 months.  With most services, you would pay a one-time setup fee of about $200 to $500, plus a service fee of $2.50 to $4.50 for each biweekly payment.  The choice is pretty obvious--make the extra payment yourself and pocket the service charges and setup fees.