Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make extra payments which go to the loan principal. People make this happen in a few different ways. For many people,Perhaps the easiest way to organize this process is to make one extra payment every year. But many people can't afford such an enormous extra payment, so splitting a single extra payment into 12 extra monthly payments works as well. Finally, you can pay a half payment every two weeks. Each of these options yields slightly different results, but they will all significantly shorten 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 down your principal every month or even every year. Keep in mind that most mortgages will permit you to make additional payments to your principal at any time. Whenever you come into unexpected cash, you can use this provision to pay a one-time additional payment toward your mortgage principal. If, for example, you receive a large gift or tax refund three years into your mortgage, investing several thousand dollars into your home's principal can shorten the period of your loan and save enormously on interest paid over the life of the mortgage loan. For most loans, even a relatively modest amount, paid early in the mortgage, could offer big savings in interest and duration of the loan.
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