Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments which go toward your loan principal. Borrowers pay extra in several different ways. Making one additional full payment one time per year is likely the easiest to track. However, many people won't be able to afford such a large extra expense, so dividing one additional payment into 12 extra monthly payments is a great option too. Another popular option is to pay half of your payment every other week. The effect here is that you make one extra monthly payment in a year. These options differ slightly in reducing the final payback amount and reducing payback length, but they will all 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 down your principal every month or even every year. Remember that almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. Whenever you come into unexpected cash, consider using this rule to make an additional one-time payment toward your mortgage principal.
If, for example, you were to receive a large gift or tax refund three years into your mortgage, you could apply a portion of this money toward your loan principal, resulting in huge savings and a shorter payback period. For most loans, even a relatively small amount, paid early enough in the mortgage, could offer big savings in interest and in the duration of the loan.
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