There's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars in interest: Make additional payments which are applied to your principal. Borrowers pay extra on principal by employing various techniques. For many people,Perhaps the simplest way to keep track is by making one additional payment a year. However, many people won't be able to afford this huge extra payment, so splitting a single extra payment into 12 additional monthly payments works as well. Finally, you can commit to paying a half payment every other week. Each option produces different results, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay extra every month or even every year. But remember that most mortgage contracts allow additional payments at any time. You can benefit from this provision to pay down your principal any time you get some extra money.
If, for example, you were to receive a large gift or tax refund four years into your mortgage, you could apply this money toward your loan principal, which would result in huge savings and a shorter loan period. For most loans, even a small amount, paid early enough in the mortgage, could offer big savings in interest and duration of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.