There's a trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make extra payments which apply to the principal. People accomplish this goal in several ways. Paying 1 extra full payment one time every year is perhaps the easiest to arrange. But some folks will not be able to pull off such an enormous extra expense, so dividing a single additional payment into twelve additional monthly payments works too. Finally, you can commit to paying half of your mortgage payment every other week. Each of these options produces slightly different results, but each will significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. But you should remember that most mortgages will allow additional principal payments at any time. Whenever you get some extra cash, consider using this rule to pay an additional one-time payment toward mortgage principal. If, for example, you receive an unexpected windfall four years into your mortgage, you could pay a portion of this windfall toward your mortgage loan principal, which would result in enormous savings and a shortened payback period. Unless the loan is very large, even a few thousand dollars applied early can produce huge savings over the life of the loan.
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