Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make additional payments that go to your principal. Borrowers pay extra in a few ways. Making one extra payment once per year is likely the simplest to track. But many folks won't be able to swing such an enormous additional payment, so splitting an additional payment into 12 additional monthly payments is a fine option too. Finally, you can pay half of your mortgage payment every other week. Each of these options yields slightly different results, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.
Some folks just can't make any extra payments. But it's important to note that most mortgage contracts allow additional principal payments at any time. 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: five years after buying your home, you receive a huge tax refund,a very large inheritance, or a non-taxable cash gift; , investing a few thousand dollars into your home's principal will shorten the repayment duration of your loan and save enormously on mortgage interest over the duration of the mortgage loan. For most loans, even this modest amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
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