There's a trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments that go to your loan principal. Borrowers can do this in various ways. Making a single extra full payment one time every year is likely the simplest to keep track of. If you can't pay an additional whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Another option is to pay half of your payment every two weeks. The result is you will make one extra monthly payment each year. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
Some people can't manage any extra payments. But you should remember that most mortgages will allow additional payments at any time. Any time you come into unexpected cash, you can use this provision to make an additional one-time payment toward your mortgage principal. If, for example, you were to receive an unexpected windfall four years into your mortgage, you could apply this money toward your mortgage loan principal, which would result in huge savings and a shortened loan period. For most loans, even this relatively modest amount, paid early enough in the loan period, could offer huge savings in interest and length 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.