Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make extra payments that are applied toward the loan principal. Borrowers can do this in several ways. For many people,Perhaps the simplest way to keep track is to make one additional payment every year. If you can't pay an extra whole payment all at once, you can divide that payment by 12 and pay that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every other week. These options differ a little in reducing the final payback amount and shortening payback length, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
Some borrowers can't manage extra payments. Keep in mind that most mortgage contracts will allow you to make additional payments to your principal at any time. You can benefit from this rule to pay extra on your principal any time you come into extra money.
If, for example, you were to receive a surprise windfall five years into your mortgage, you could pay this windfall toward your loan principal, resulting in significant savings and a shortened loan period. For most loans, even a relatively small amount, paid early in the loan period, could offer big savings in interest and in the length 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.