There's a simple trick to reduce the repayment period of your mortgage and save you thousands in interest: Make extra payments that are applied toward your principal. Borrowers pay extra on principal by employing various techniques. For many people,Perhaps the easiest way to keep track is by making 1 extra payment every year. If you can't afford to pay an extra whole payment in one month, you can divide your payment by 12 and write a check for that additional amount monthly. Finally, you can pay a half payment every two weeks. These options differ slightly in lowering the total interest paid and shortening payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay more every month or even every year. Remember that virtually all mortgage contracts will allow you to pay extra on your principal at any time. Whenever you get some unexpected money, you can use this rule to make an additional one-time payment toward your mortgage principal.
If, for example, you were to receive a very large gift or tax refund five years into your mortgage, you could apply this windfall toward your mortgage loan principal, which would result in significant savings and a shortened payback period. Unless the mortgage loan is quite large, even modest amounts applied early can yield huge benefits over the duration of the loan.
Do you have a question regarding a mortgage program?