Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments which go toward the loan principal. Borrowers can pay more on principal in many different ways. For many people,Perhaps the easiest way to keep track is to make one extra mortgage payment a year. Of course, some folks won't be able to pull off such a large extra payment, so splitting one additional payment into 12 additional monthly payments works as well. Finally, you can commit to paying a half payment every other week. 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 duration of the loan.
Some folks just can't make extra payments. But you should remember that most mortgage contracts will allow additional payments at any time. Whenever you get some extra money, you can use this provision to make an additional one-time payment toward mortgage principal.
For example: several years after moving into your home, you receive a huge tax refund,a large legacy, or a cash gift; , you could apply this money toward your loan principal, which would result in significant savings and a shortened payback period. Unless the 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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