There's a simple trick to significantly reduce the length of your mortgage and save thousands over the course of your loan: Make additional payments which go to your loan principal. Borrowers can do this in various ways. For many people,Perhaps the simplest way to keep track is to make one extra mortgage payment per year. But many folks can't swing such an enormous extra payment, so dividing one additional payment into 12 extra monthly payments works too. Finally, you can commit to paying half of your mortgage payment every other week. Each of these options yields slightly different results, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
Some folks just can't make extra payments. But remember that most mortgage contracts allow you to make additional principal payments at any time. Whenever you get some extra cash, you can use this rule to make an additional one-time payment toward your principal.
If, for example, you receive a large gift or tax refund five years into your mortgage, you could apply a portion of this windfall toward your mortgage loan principal, resulting in significant savings and a shortened loan period. Unless the mortgage loan is very large, even a few thousand dollars applied early can yield huge benefits over the life of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.