Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments that are applied to the loan principal. You can do this in several ways. For many people,Perhaps the simplest way to keep track is to make one additional mortgage payment per year. But some folks can't afford such a large extra payment, so dividing a single extra payment into twelve additional monthly payments is a great option too. Finally, you can pay half of your mortgage payment every two weeks. Each of these options yields slightly different results, but they will all significantly shorten the length of your mortgage and lower the total interest you will pay over the life of the loan.
Some people can't manage extra payments. Keep in mind that virtually all mortgages will permit you to pay extra on your principal at any point during repayment. You can take advantage of this provision to pay extra on your mortgage principal any time you come into extra money.
If, for example, you receive a surprise windfall three years into your mortgage, investing several thousand dollars into your mortgage principal will significantly shorten the repayment period of your loan and save enormously on mortgage interest paid over the life of the loan. Unless the loan is quite large, even modest amounts applied early in the loan period can yield huge benefits over the duration of the loan.
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