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 toward your principal. You can accomplish this using a few different techniques. For many people,Perhaps the easiest way to organize this process is by making 1 extra payment a year. If you can't afford to pay an additional whole payment in one month, you can divide your payment by 12 and pay that additional amount monthly. Another option is to pay half of your payment every other week. The result is you make one extra monthly payment each year. These options differ a little in reducing the total interest paid and reducing payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
Some folks just can't make extra payments. But remember that most mortgage contracts will allow additional principal payments at any time. You can take advantage of this rule to pay down your mortgage principal when you get some extra money.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, you could apply this windfall toward your loan principal, resulting in significant savings and a shortened loan period. Unless the mortgage loan is quite large, even small amounts applied early can produce huge savings over the duration of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.