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 are applied to your principal. Borrowers can accomplish this in various ways. Paying a single additional payment once every year is perhaps the simplest to track. But many people can't afford this huge additional payment, so splitting one additional payment into twelve extra monthly payments works too. Another option is to pay a half payment every other week. The result is you will make one extra monthly payment every year. These options differ slightly in lowering the final payback amount and reducing payback length, but they will all significantly shorten the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. Remember that most mortgage contracts will permit you to make additional payments to your principal at any point during repayment. You can benefit from this rule to pay extra on your principal any time you come into extra money.
Here's an example: five years after moving into your home, you get a larger than expected tax refund,a large inheritance, or a cash gift; , you could pay a portion of this windfall toward your mortgage loan principal, which would result in significant savings and a shorter payback period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can produce huge savings over the duration of the loan.
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