Here's a simple trick to significantly reduce the length of your mortgage and save you thousands in interest: Make additional payments that go toward your principal. People accomplish this goal in several different ways. For many people,Perhaps the easiest way to organize this process is to make 1 extra mortgage payment every year. However, many people can't swing such a large additional payment, so splitting an additional payment into twelve extra monthly payments works as well. Finally, you can pay 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 shorten the duration of your mortgage and lower your total interest paid.
Some borrowers just can't make extra payments. Keep in mind that almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. You can benefit from this provision to pay extra on your mortgage principal when you get some extra money.
If, for example, you were to receive a very large gift or tax refund just a few years into your mortgage, you could apply this money toward your loan principal, resulting in significant savings and a shorter payback period. Unless the mortgage loan is quite large, even small amounts applied early in the loan period 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.