Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which apply toward your principal. People employ various techniques to accomplish this goal. Making a single extra full payment one time per year is probably the easiest to keep track of. But many people will not be able to afford such an enormous additional payment, so splitting an additional payment into 12 extra monthly payments is a fine option too. Another very popular option is to pay a half payment every two weeks. The result is you will make one extra monthly payment every year. These options differ a little in reducing the total interest paid and shortening payback length, but they will all significantly reduce the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Some borrowers just can't make any extra payments. Keep in mind that most mortgage contracts will allow you to make additional payments to your principal at any point during repayment. You can take advantage of this provision to pay extra on your mortgage principal any time you come into extra money.
Here's an example: five years after moving into your home, you receive a very large tax refund,a very large inheritance, or a non-taxable cash gift; , you could pay this money toward your loan principal, which would result in significant savings and a shortened loan period. For most loans, even this relatively modest amount, paid early in the mortgage, could offer huge savings in interest and in the duration of the loan.
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