Extra Payments Provide Huge Mortgage Savings
Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments which go toward the loan principal. People employ various techniques to meet this goal. For many people,Perhaps the simplest way to organize this process is to make 1 additional mortgage payment every year. But some people will not be able to pull off this huge extra expense, so splitting an extra payment into 12 extra monthly payments works as well. Finally, you can pay half of your mortgage 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 duration of the loan.
Lump Sum Extra Payment
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgage contracts will allow you to make additional principal payments at any time. You can take advantage of this provision to pay down your mortgage principal any time you come into extra money. If, for example, you were to receive a large gift or tax refund five years into your mortgage, you could apply a portion of this windfall toward your mortgage loan principal, which would result in enormous savings and a shortened payback period. For most loans, even this small amount, paid early in the loan period, could offer big savings in interest and duration of the loan.