Here's a simple trick to reduce the repayment period of your mortgage and save thousands over the course of your loan: Make extra payments which apply to your principal. Borrowers can do this using a few different techniques. Making a single extra payment once every year is perhaps the simplest to keep track of. But many people will not be able to afford this huge additional payment, so splitting one extra payment into twelve extra monthly payments is a great option too. Finally, you can pay half of your mortgage payment every other week. These options differ slightly in reducing the total interest paid and reducing payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.
Some folks just can't make any extra payments. Remember that most mortgage contracts will allow you to pay extra on your principal at any time. You can benefit from this provision to pay extra on your mortgage principal any time you come into extra money. If, for example, you receive a large gift or tax refund three years into your mortgage, you could apply a portion of this windfall toward your loan principal, resulting in significant savings and a shortened loan period. For most loans, even a modest amount, paid early in the loan period, could offer huge savings in interest and duration of the loan.
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