Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments which are applied to your loan principal. Borrowers accomplish this goal in several different ways. Making one extra full payment once every year is likely the easiest to arrange. However, some folks will not be able to pull off this huge extra payment, so splitting a single additional payment into twelve additional monthly payments is a fine option too. Another option is to pay a half payment every two weeks. The result is you will make one extra monthly payment each year. Each option produces slightly different results, but they will all significantly reduce the length of your mortgage and lower the total interest you will pay over the life of the loan.
It may not be possible for you to pay extra every month or even every year. Keep in mind that virtually all mortgage contracts will permit you to pay extra on your principal at any point during repayment. Any time you get some unexpected cash, you can use this provision to make a one-time additional payment on principal.
If, for example, you were to receive a very large gift or tax refund five years into your mortgage, investing a few thousand dollars into your mortgage principal can shorten the duration of your loan and save a huge amount on mortgage interest over the life of the loan. Unless the loan is very large, even a few thousand dollars applied early in the loan period can produce huge savings over the life of the loan.
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