There's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make extra payments that go toward the principal. You can accomplish this using a few different techniques. For many people,Perhaps the simplest way to keep track is to make one additional mortgage payment a year. However, many folks will not be able to afford this huge additional payment, so splitting a single extra payment into twelve extra monthly payments works as well. Finally, you can commit to paying a half payment every other week. These options differ slightly in lowering the final payback amount and shortening payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
Some borrowers can't manage any extra payments. But you should remember that most mortgages allow additional payments at any time. Any time you come into extra cash, you can use this provision to pay an additional one-time payment on mortgage principal.
If, for example, you receive a very large gift or tax refund four years into your mortgage, paying a few thousand dollars into your home's principal can shorten the repayment period of your loan and save a huge amount on mortgage interest paid over the duration of the mortgage loan. For most loans, even this relatively modest amount, paid early in the mortgage, could offer big savings in interest and in the length of the loan.
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