Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments that apply to your principal. Borrowers can pay more on principal in many different ways. Making one additional payment once per year is likely the easiest to track. But some people will not be able to pull off this huge extra expense, so dividing an extra payment into 12 additional monthly payments is a great option too. Finally, you can commit to paying half of your mortgage payment every other week. These options differ a little in lowering the final payback amount and shortening payback length, but each will 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 it's important to note that most mortgages will allow additional principal payments at any time. Whenever you get some unexpected cash, you can use this provision to make an additional one-time payment on principal.
Here's an example: several years after moving into your home, you receive a very large tax refund,a very large inheritance, or a non-taxable cash gift; , paying several thousand dollars into your mortgage principal can shorten the duration of your loan and save enormously on interest over the life of the mortgage loan. Unless the loan is quite large, even a few thousand dollars applied early can yield huge benefits over the life of the loan.
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