Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make additional payments which apply toward your loan principal. People accomplish this goal in several different ways. Making one additional full payment one time every year is likely the simplest to track. But many folks won't be able to afford this huge additional payment, so splitting one additional payment into 12 additional monthly payments works as well. Another very popular option is to pay half of your payment every other week. The effect here is that you will make one additional monthly payment each year. These options differ a little in lowering the total interest paid and shortening payback length, but they will all significantly shorten the duration 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 down your principal every month or even every year. But it's important to note that most mortgages will allow you to make additional payments at any time. You can benefit from this provision to pay down your principal any time you get some extra money.
Here's an example: several years after buying your home, you receive a huge tax refund,a very large legacy, or a cash gift; , paying several thousand dollars into your mortgage principal can reduce the duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. For most loans, even a small amount, paid early enough in the mortgage, could offer big savings in interest and in 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.