There's a trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make additional payments that are applied toward the loan principal. People accomplish this goal in a few different ways. Paying a single extra full payment once a year is likely the simplest to track. But some folks can't swing such an enormous extra expense, so dividing one extra payment into 12 extra monthly payments is a great option too. Finally, you can pay half of your mortgage payment every other week. Each of these options produces different results, but each will significantly shorten the duration of your mortgage and lower the total interest you will pay over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that virtually all mortgage contracts will allow you to make additional payments to your principal at any time. Whenever you get some extra money, consider using this rule to make an additional one-time payment toward your mortgage principal.
For example: a few years after moving into your home, you get a huge tax refund,a very large inheritance, or a non-taxable cash gift; , you could apply a portion of this windfall toward your loan principal, resulting in huge savings and a shortened payback period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can produce huge savings over the duration of the loan.
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