Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make additional payments which are applied to the principal. You can pay extra on principal in various ways. Paying 1 extra full payment once every year may be the simplest to keep track of. However, some folks won't be able to swing this huge additional payment, so dividing an additional payment into twelve extra monthly payments works too. Another popular option is to pay half of your payment every two weeks. The result is you make one extra monthly payment in a year. Each of these options produces slightly different results, but each will significantly shorten the length of your mortgage and lower the total interest you will pay over the life of the loan.
Some borrowers just can't make extra payments. But you should remember that most mortgage contracts will allow you to make additional principal payments at any time. Any time you get some extra cash, you can use this rule to make an additional one-time payment toward mortgage principal. If, for example, you were to receive a surprise windfall three years into your mortgage, paying several thousand dollars into your mortgage principal can reduce the repayment duration of your loan and save a huge amount on mortgage interest over the life of the mortgage loan. For most loans, even a small amount, paid early in the mortgage, could offer huge savings in interest and in the length of the loan.
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