There's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make extra payments which are applied to your principal. People employ various techniques to accomplish this goal. For many people,Perhaps the simplest way to keep track is by making one additional mortgage payment every year. If you can't pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another very popular option is to pay half of your payment every two weeks. The effect here is that you make one additional monthly payment each year. These options differ a little in reducing the total interest paid and reducing payback length, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
Some people can't manage extra payments. But it's important to note that most mortgage contracts allow additional payments at any time. Any time you come into extra cash, consider using this rule to pay an additional one-time payment on principal.
Here's an example: five years after moving into your home, you get a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , investing a few thousand dollars into your home's principal will reduce the repayment duration of your loan and save a huge amount on interest paid over the life of the loan. Unless the loan is very large, even a few thousand dollars applied early can yield huge benefits over the life of the loan.
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