There's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments which go toward the loan principal. Borrowers can do this in various ways. Paying a single additional full payment one time every year may be the simplest to track. However, some folks will not be able to swing such a large extra expense, so splitting a single additional payment into 12 extra monthly payments is a fine option too. Finally, you can pay a half payment every two weeks. Each option produces different results, but each will significantly shorten the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Some people can't manage any extra payments. Remember that virtually all mortgages will allow you to make additional payments to your principal at any point during repayment. Whenever you get some unexpected money, consider using this provision to make an additional one-time payment toward your mortgage principal. Here's an example: a few years after moving into your home, you receive a very large tax refund,a large legacy, or a cash gift; , investing a few thousand dollars into your mortgage principal will significantly reduce the repayment duration of your loan and save enormously on mortgage interest paid over the life of the loan. Unless the mortgage loan is quite large, even a few thousand dollars applied early can produce huge benefits over 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.