There's a trick to reduce the repayment period of your mortgage and save you thousands in interest: Make extra payments which are applied toward the principal. You can do this in various ways. Making a single additional full payment one time a year is probably the simplest to keep track of. Of course, some people will not be able to afford such a large additional expense, so splitting one additional payment into 12 extra monthly payments works too. Another option is to pay half of your payment every other week. The result is you will make one extra monthly payment each year. These options differ a little in reducing the total interest paid and reducing payback length, 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 borrowers just can't make extra payments. Remember that virtually all mortgage contracts will permit you to pay extra on your principal at any time. Any time you come into extra money, you can use this rule to pay an additional one-time payment on mortgage principal.
Here's an example: five years after moving into your home, you get a larger than expected tax refund,a large inheritance, or a non-taxable cash gift; , investing several thousand dollars into your mortgage principal will reduce the duration of your loan and save enormously on interest over the life of the loan. Unless the loan is very large, even a few thousand dollars applied early can yield huge savings over the life of the loan.
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