Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which are applied toward your loan principal. Borrowers employ various techniques to meet this goal. Making 1 extra full payment one time per year is likely the simplest to track. If you can't afford to pay an extra whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another popular option is to pay half of your payment every two weeks. The result is you will make one additional monthly payment every year. These options differ slightly in reducing the total interest paid and reducing payback length, but each will significantly shorten the duration of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay more every month or even every year. Keep in mind that most mortgage contracts will allow you to make additional payments to your principal at any point during repayment. Whenever you get some unexpected cash, consider using this rule to pay a one-time additional payment toward your mortgage principal.
For example: five years after moving into your home, you get a very large tax refund,a very large legacy, or a cash gift; , you could apply a portion of this windfall toward your mortgage loan principal, resulting in huge savings and a shortened loan period. Unless the mortgage loan is very large, even small amounts applied early can yield huge savings over the duration of the loan.
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