There's a trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make extra payments that are applied toward the loan principal. Borrowers employ various techniques to meet this goal. Paying one additional full payment one time per year is perhaps the easiest to track. Of course, many people will not be able to swing this huge additional expense, so dividing a single additional payment into 12 extra monthly payments works as well. Another option is to pay half of your payment every other week. The effect here is that you will make one extra monthly payment every year. These options differ slightly in reducing the total interest paid and reducing payback length, but they will all significantly reduce the length of your mortgage and lower the total interest you will pay over the life of the loan.
Some people can't manage extra payments. But it's important to note that most mortgages will allow you to make additional principal payments at any time. You can benefit from this provision to pay extra on your principal any time you come into extra money. Here's an example: several years after moving into your home, you receive a larger than expected tax refund,a large inheritance, or a non-taxable cash gift; , investing several thousand dollars into your home's principal will reduce the repayment period of your loan and save a huge amount on mortgage interest paid over the duration of the loan. Unless the 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.