There's a trick to significantly reduce the length of your mortgage and save you thousands of dollars in interest: Make extra payments which are applied toward your principal. Borrowers pay extra on principal in various ways. For many people,Perhaps the simplest way to organize this process is to make one extra mortgage payment every year. However, many folks will not be able to afford this huge additional expense, so dividing one extra payment into twelve additional monthly payments works too. Finally, you can pay half of your mortgage payment every two weeks. Each option yields different results, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay more every month or even every year. Keep in mind that almost all mortgage contracts will allow you to make additional payments to your principal at any time. Any time you get some extra money, consider using this rule to make an additional one-time payment toward principal. Here's an example: five years after moving into your home, you get a larger than expected tax refund,a very large legacy, or a non-taxable cash gift; , you could apply this money toward your loan principal, which would result in huge savings and a shortened payback period. For most loans, even a relatively modest amount, paid early enough in the mortgage, could offer huge savings in interest and duration of the loan.
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