There's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make extra payments which apply toward your principal. Borrowers pay extra on principal in various ways. For many people,Perhaps the easiest way to keep track is to make one extra payment per year. But some folks will not be able to pull off this huge additional payment, so splitting one extra payment into 12 additional monthly payments works as well. Finally, you can pay a half payment every two weeks. Each of these options yields different results, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that virtually all mortgage contracts will permit you to make additional payments to your principal at any time. Any time you get some extra money, you can use this provision to make an additional one-time payment toward your mortgage principal. Here's an example: several years after moving into your home, you receive a very large tax refund,a very large legacy, or a non-taxable cash gift; , investing several thousand dollars into your mortgage principal can significantly reduce the repayment period of your loan and save enormously on mortgage interest paid over the duration of the loan. Unless the loan is very large, even a few thousand dollars applied early in the loan period can yield huge benefits over the life of the loan.
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