There's a trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make additional payments that apply to your principal. People pay extra in a few ways. Paying one additional full payment once a year is perhaps the simplest to track. Of course, some folks will not be able to swing this huge additional expense, so dividing one extra payment into 12 extra monthly payments is a fine option too. Another very popular option is to pay half of your payment every other week. The effect here is that you 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 your total interest paid.
It may not be possible for you to pay extra every month or even every year. Keep in mind that most mortgage contracts will permit you to pay extra on your principal at any time. You can benefit from this provision to pay down your mortgage principal any time you come into extra money.
For example: five 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 huge savings and a shortened loan period. Unless the loan is very large, even modest amounts applied early can yield huge savings over the life of the loan.
Do you have a question regarding a mortgage program?