Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which are applied toward the loan principal. Borrowers accomplish this goal in several ways. Paying one additional full payment one time a year is probably the easiest to arrange. However, some people can't afford such an enormous additional payment, so dividing one additional payment into 12 additional monthly payments is a great option too. Another popular option is to pay half of your payment every two weeks. The effect here is that you will make one extra monthly payment each year. Each option yields different results, but they will all significantly shorten the duration of your mortgage and lower your total interest paid.
Some borrowers just can't make extra payments. But remember that most mortgages allow you to make additional payments at any time. You can benefit from this rule to pay extra on your mortgage principal any time you get some extra money.
If, for example, you receive a very large gift or tax refund just a few years into your mortgage, you could apply this windfall toward your loan principal, resulting in enormous savings and a shorter payback period. Unless the mortgage loan is very large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
Do you have a question regarding a mortgage program?