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 against principal by employing various techniques. Paying 1 extra full payment one time per year is likely the easiest to keep track of. If you can't pay an extra whole payment in one month, you can divide that payment by 12 and write a check for that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every two weeks. Each option yields slightly different results, but they will all significantly shorten the length 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. Keep in mind that virtually all mortgage contracts will allow you to make additional payments to your principal at any time. Any time you come into unexpected cash, you can use this rule to make a one-time additional payment toward principal.
For example: a few years after buying your home, you receive a huge tax refund,a very large legacy, or a cash gift; , investing several thousand dollars into your home's principal will reduce the duration of your loan and save a huge amount on interest paid over the duration of the loan. For most loans, even this relatively modest amount, paid early in the mortgage, could offer big savings in interest and 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.