Here's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make extra payments which apply to the loan principal. Borrowers pay against principal in various ways. Paying one additional payment one time every year is perhaps the simplest to keep track of. However, many folks won't be able to afford this huge extra payment, so dividing a single additional payment into 12 extra monthly payments is a great option too. Finally, you can commit to paying half of your mortgage payment every two weeks. These options differ a little in reducing the total interest paid and reducing payback length, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.
Some borrowers just can't make any extra payments. Keep in mind that most mortgage contracts will permit you to pay extra on your principal at any point during repayment. Whenever you get some extra cash, consider using this provision to make an additional one-time payment on your principal.
Here's an example: several years after buying your home, you get a huge tax refund,a large legacy, or a non-taxable cash gift; , paying a few thousand dollars into your home's principal will significantly shorten the duration of your loan and save a huge amount on interest paid over the duration of the mortgage loan. For most loans, even a small amount, paid early in the loan period, could offer big savings in interest and in the duration of the loan.
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