There's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which apply toward the principal. Borrowers use different methods to meet this goal. For many people,Perhaps the simplest way to organize this process is to make one extra payment per year. But some folks can't swing this huge extra expense, so dividing one extra payment into twelve extra monthly payments works too. Another very popular option is to pay half of your payment every other week. The result is you make one extra monthly payment each year. These options differ a little in lowering the final payback amount and reducing payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay more every month or even every year. Keep in mind that virtually all mortgages will allow you to make additional payments to your principal at any time. Whenever you come into unexpected money, consider using this rule to pay a one-time additional payment toward your mortgage principal.
If, for example, you receive a very large gift or tax refund four years into your mortgage, you could apply this windfall toward your loan principal, resulting in huge savings and a shorter loan period. Unless the loan is quite large, even modest amounts applied early in the loan period can yield huge savings over the duration of the loan.
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