Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments which are applied toward the principal. You can pay against principal in various ways. Making a single additional payment once a year is likely the simplest to arrange. Of course, many people can't pull off such an enormous additional expense, so dividing an additional payment into 12 additional monthly payments is a great option too. Finally, you can pay a half payment every two weeks. These options differ slightly in reducing the total interest paid and shortening payback length, but each will significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay extra every month or even every year. But it's important to note that most mortgages allow you to make additional payments at any time. Any time you come into extra cash, consider using this rule to pay an additional one-time payment toward mortgage principal. Here's an example: several years after buying your home, you get a very large tax refund,a large legacy, or a cash gift; , investing several thousand dollars into your mortgage principal will shorten the duration of your loan and save a huge amount on interest paid over the life of the loan. Unless the mortgage loan is very large, even modest amounts applied early can produce huge savings over the duration of the loan.
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