Here's a simple trick to significantly reduce the length of your mortgage and save you thousands in interest: Make extra payments that go to your principal. Borrowers accomplish this goal in several different ways. Making 1 extra full payment once a year is perhaps the simplest to keep track of. But many folks won't be able to swing this huge additional expense, so dividing an extra payment into 12 additional monthly payments works as well. Another popular option is to pay a half payment every two weeks. The result is you make one extra monthly payment every year. These options differ a little in reducing the total interest paid and shortening payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
Some folks can't manage any extra payments. But you should remember that most mortgages will allow you to make additional principal payments at any time. You can take advantage of this provision to pay extra on your mortgage principal when you come into extra money. For example: five years after buying your home, you get a larger than expected tax refund,a very large legacy, or a cash gift; , paying a few thousand dollars into your home's principal will reduce the duration of your loan and save enormously on interest over the life of the loan. For most loans, even a small amount, paid early in the loan period, could offer big savings in interest and in the length of the loan.
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