Here's a simple trick to significantly reduce the length of your mortgage and save you thousands in interest: Make extra payments that are applied to your principal. You can accomplish this using a few different techniques. Making one additional full payment one time per year may be the simplest to arrange. If you can't pay an additional whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every other week. Each option produces slightly different results, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay extra every month or even every year. But it's important to note that most mortgage contracts will allow additional principal payments at any time. You can take advantage of this provision to pay down your principal any time you come into extra money.
Here's an example: a few years after buying your home, you get a very large tax refund,a large inheritance, or a non-taxable cash gift; , paying a few thousand dollars into your mortgage principal can significantly shorten the period of your loan and save enormously on interest paid over the life of the mortgage loan. Unless the loan is quite large, even modest amounts applied early can produce huge savings over the life 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.