Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which are applied to the loan principal. You pay extra on principal in various ways. Paying 1 extra full payment one time every year is probably the simplest to track. Of course, some folks will not be able to pull off this huge additional expense, so splitting a single extra payment into 12 additional monthly payments is a fine option too. Another popular option is to pay a half payment every other week. The effect here is that you will make one additional monthly payment each year. Each of these options yields different results, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
Some people can't manage any extra payments. Keep in mind that virtually all mortgages will allow you to make additional payments to your principal at any time. You can benefit from this rule to pay down your principal when you get some extra money.
If, for example, you receive a very large gift or tax refund four years into your mortgage, investing a few thousand dollars into your mortgage principal can significantly reduce the duration of your loan and save enormously on mortgage interest over the duration of the mortgage loan. Unless the mortgage loan is quite large, even modest amounts applied early can yield huge savings 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.