There's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make additional payments that are applied toward the principal. You can pay extra on principal by employing various techniques. Paying a single additional payment one time per year may be the simplest to track. However, some people can't swing such an enormous additional payment, so dividing one extra payment into 12 extra monthly payments works too. Another popular option is to pay half of your payment every two weeks. The effect here is that you make one additional monthly payment every year. Each of these options produces different results, but each will significantly shorten the length of your mortgage and lower the total interest you will pay over the life of the loan.
Some borrowers just can't make extra payments. But remember that most mortgage contracts will allow you to make additional payments at any time. Any time you come into extra money, consider using this rule to make an additional one-time payment toward mortgage principal. For example: several years after moving into your home, you get a larger than expected tax refund,a large inheritance, or a non-taxable cash gift; , you could apply a portion of this money toward your loan principal, resulting in enormous savings and a shorter loan period. For most loans, even a small amount, paid early in the loan period, could offer big savings in interest and duration of the loan.
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