Here's a simple trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make additional payments which go to the loan principal. Borrowers use different methods to accomplish this goal. For many people,Perhaps the simplest way to keep track is to make one additional mortgage payment a year. But many people will not be able to pull off such a large extra expense, so splitting an additional payment into 12 extra monthly payments works too. Another option is to pay a half payment every two weeks. The effect here is that you will make one additional monthly payment in a year. These options differ slightly in lowering the total interest paid and shortening payback length, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay down your principal every month or even every year. Remember that most mortgage contracts will allow you to make additional payments to your principal at any time. Whenever you come into extra cash, consider using this rule to pay an additional one-time payment on mortgage principal.
Here's an example: a few years after buying your home, you receive a larger than expected tax refund,a very large inheritance, or a cash gift; , investing several thousand dollars into your home's principal will significantly reduce the duration of your loan and save a huge amount on interest over the duration of the loan. For most loans, even a modest amount, paid early enough in the loan period, could offer big savings in interest and in the duration of the loan.
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