There's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make extra payments which apply to the loan principal. Borrowers can do this in various ways. For many people,Perhaps the easiest way to keep track is to make 1 additional mortgage payment every year. Of course, many folks can't afford such a large additional expense, so splitting one extra payment into twelve extra monthly payments is a great option too. Another popular option is to pay half of your payment every other week. The result is you make one extra monthly payment each year. Each of these options yields different results, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
Some people just can't make any extra payments. Remember that almost all mortgage contracts will permit you to pay extra on your principal at any time. Whenever you come into unexpected money, you can use this provision to pay a one-time additional payment on principal.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, investing several thousand dollars into your mortgage principal will significantly reduce the repayment period of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. For most loans, even this relatively modest amount, paid early enough in the loan period, could offer huge savings in interest and in the duration of the loan.
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