Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make additional payments that apply to your principal. People make this happen in several different ways. Paying a single extra payment once per year is probably the easiest to arrange. Of course, many folks can't swing such an enormous additional payment, so dividing one additional payment into 12 extra monthly payments works as well. Finally, you can commit to paying a half payment every other week. These options differ slightly in reducing the total interest paid and shortening payback length, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
Some folks just can't make any extra payments. Remember that almost all mortgage contracts will permit you to make additional payments to your principal at any time. You can benefit from this provision to pay extra on your principal when you come into extra money.
For example: several years after moving into your home, you receive a very large tax refund,a large inheritance, or a non-taxable cash gift; , you could pay a portion of this windfall toward your mortgage loan principal, which would result in significant savings and a shorter loan period. Unless the mortgage loan is very large, even small amounts applied early in the loan period can produce huge benefits over the duration of the loan.
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