There's a trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make extra payments that go to the principal. Borrowers use different methods to accomplish this goal. For many people,Perhaps the easiest way to keep track is to make one extra mortgage payment every year. But some people won't be able to afford such a large extra payment, so splitting an extra payment into twelve extra monthly payments is a great option too. Finally, you can commit to paying a half payment every other week. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
Some folks just can't make any extra payments. But remember that most mortgages allow you to make additional payments at any time. Any time you get some extra cash, consider using this provision to make a one-time additional payment on principal. If, for example, you receive a very large gift or tax refund four years into your mortgage, you could pay a portion of this windfall toward your loan principal, which would result in significant savings and a shorter payback period. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer big savings in interest and in the duration of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.