There's a simple trick to significantly reduce the length of your mortgage and save you thousands in interest: Make additional payments that go toward your principal. You can accomplish this using a few different techniques. Paying 1 extra payment once a year is perhaps the easiest to track. Of course, some folks won't be able to swing this huge additional payment, so splitting an extra payment into 12 additional monthly payments is a fine option too. Finally, you can pay a half payment every two weeks. These options differ slightly in lowering the final payback amount and reducing payback length, but each will significantly reduce the length of your mortgage and lower the total interest you will pay over the duration of the loan.
It may not be possible for you to pay down your principal every month or even every year. Remember that virtually all mortgage contracts will allow you to pay extra on your principal at any point during repayment. Whenever you come into extra money, you can use this provision to pay an additional one-time payment on your principal.
Here's an example: several years after moving into your home, you get a very large tax refund,a very large inheritance, or a cash gift; , paying several thousand dollars into your mortgage principal will reduce the period of your loan and save a huge amount on interest paid over the life of the loan. For most loans, even a small amount, paid early in the mortgage, could offer big savings in interest and in the duration of the loan.
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