Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments which apply toward your loan principal. People use different methods to meet this goal. Paying one extra full payment once per year is likely the simplest to track. Of course, some people will not be able to afford such an enormous additional payment, so splitting a single additional payment into twelve additional monthly payments is a great option too. Finally, you can pay half of your mortgage payment every two weeks. Each option produces different results, but each will significantly shorten the length of your mortgage and lower the total interest you will pay over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. Keep in mind that almost all mortgage contracts will allow you to pay extra on your principal at any point during repayment. You can benefit from this provision to pay extra on your principal when you come into extra money.
If, for example, you receive a large gift or tax refund just a few years into your mortgage, you could apply a portion of this windfall toward your loan principal, resulting in enormous savings and a shorter loan period. For most loans, even this modest amount, paid early in the mortgage, could offer big savings in interest and duration of the loan.
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