There's a simple trick to reduce the repayment period of your mortgage and save you thousands in interest: Make extra payments which apply toward the principal. Borrowers pay extra in several different ways. Paying a single extra full payment one time a year is probably the easiest to keep track of. However, some people will not be able to pull off this huge additional expense, so splitting one extra payment into 12 extra monthly payments works too. Finally, you can commit to paying half of your mortgage payment every other week. Each option produces slightly different results, but they will all significantly shorten the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. But you should remember that most mortgages will allow additional principal payments at any time. You can benefit from this provision to pay extra on your principal when you come into extra money. Here's an example: several years after moving into your home, you get a larger than expected tax refund,a large legacy, or a cash gift; , investing a few thousand dollars into your mortgage principal will significantly reduce the period of your loan and save enormously on mortgage interest paid over the life of the loan. For most loans, even a modest amount, paid early enough in the loan period, could offer big savings in interest and in the duration of the loan.
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