Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars in interest: Make additional payments which apply to your loan principal. You can accomplish this using a few different techniques. Paying a single extra payment once every year may be the easiest to track. However, some folks will not be able to swing this huge extra expense, so splitting a single extra payment into twelve additional monthly payments works too. Another option is to pay half of your payment every other week. The result is you make one additional monthly payment each year. Each option produces slightly different results, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay extra every month or even every year. But it's important to note that most mortgage contracts allow additional principal payments at any time. You can benefit from this rule to pay extra on your mortgage principal when you get some extra money.
Here's an example: a few years after buying your home, you get a very large tax refund,a large inheritance, or a cash gift; , paying several thousand dollars into your home's principal can significantly shorten the repayment duration of your loan and save enormously on mortgage interest paid over the life of the loan. Unless the mortgage loan is quite large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
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