Here's a simple trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make additional payments that go toward your loan principal. People make this happen in several different ways. Making one extra payment once every year is likely the simplest to arrange. Of course, many folks will not be able to swing such an enormous additional 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 other week. The effect here is that you will make one extra monthly payment every year. Each of these options yields slightly different results, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the duration of the loan.
Some people just can't make any extra payments. Keep in mind that almost all mortgage contracts will permit you to pay extra on your principal at any time. You can take advantage of this rule to pay down your principal when you come into extra money.
Here's an example: five years after buying your home, you receive a very large tax refund,a large legacy, or a non-taxable cash gift; , paying several thousand dollars into your mortgage principal will shorten the repayment duration of your loan and save a huge amount on mortgage interest paid over the duration of the loan. Unless the loan is quite large, even a few thousand dollars applied early can produce huge savings over the life 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.