There's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make additional payments that apply to the principal. You can accomplish this in various ways. Paying a single additional payment one time per year is probably the simplest to track. If you can't afford to pay an additional whole payment all at once, you can divide that payment by 12 and write a check for that additional amount monthly. Another popular option is to pay half of your payment every other week. The effect here is that you will make one extra monthly payment in a year. Each of these options produces slightly different results, but each will significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that most mortgage contracts will allow you to make additional payments to your principal at any time. Whenever you get some unexpected money, consider using this rule to pay a one-time additional payment toward your mortgage principal.
If, for example, you were to receive a surprise windfall just a few years into your mortgage, you could apply a portion of this money toward your loan principal, resulting in huge savings and a shorter loan period. Unless the loan is quite large, even a few thousand dollars applied early in the loan period can yield 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.