Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments that are applied toward the principal. Borrowers employ various techniques to accomplish this goal. For many people,Perhaps the simplest way to organize this process is to make one additional payment per year. If you can't pay an extra whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another option is to pay half of your payment every two weeks. The result is you make one extra monthly payment each year. Each of these options produces slightly different results, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.
Some borrowers can't manage any extra payments. But it's important to note that most mortgage contracts will allow additional payments at any time. Whenever you get some unexpected cash, you can use this rule to make an additional one-time payment toward your mortgage principal.
Here's an example: several years after buying your home, you receive a very large tax refund,a very large inheritance, or a non-taxable cash gift; , you could pay this money toward your loan principal, which would result in enormous savings and a shortened loan period. Unless the loan is very large, even a few thousand dollars applied early in the loan period can produce huge savings over the life of the loan.
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