Here's a simple trick to significantly reduce the length of your mortgage and save thousands over the course of your loan: Make additional payments that go to your principal. You can accomplish this in several ways. Paying 1 additional full payment one time per year is likely the easiest to track. However, many people can't pull off this huge additional expense, so dividing an additional payment into 12 extra monthly payments is a fine option too. Another popular option is to pay a half payment every two weeks. The result is you will make one extra monthly payment each year. These options differ a little in reducing the final payback amount and reducing payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.
Some borrowers can't manage extra payments. Remember that almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. You can benefit from this provision to pay down your principal when you come into extra money.
Here's an example: five years after buying your home, you get a larger than expected tax refund,a large legacy, or a non-taxable cash gift; , you could pay a portion of this money toward your mortgage loan principal, which would result in significant savings and a shorter loan period. Unless the loan is quite large, even small amounts applied early in the loan period can yield huge benefits over the duration of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.