Here's a simple trick to significantly reduce the length of your mortgage and save thousands over the course of your loan: Make extra payments that apply to your principal. People employ various techniques to accomplish this goal. Making one additional payment once every year is probably the simplest to track. Of course, some folks can't pull off such an enormous extra payment, so dividing an extra payment into 12 extra monthly payments is a great option too. Another option is to pay half of your payment every two weeks. The effect here is that you make one extra monthly payment each year. Each option yields slightly different results, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that virtually all mortgages will permit you to make additional payments to your principal at any point during repayment. Whenever you get some unexpected money, consider using this rule to pay an additional one-time payment on principal. If, for example, you receive a surprise windfall five years into your mortgage, investing a few thousand dollars into your mortgage principal can significantly shorten the repayment duration of your loan and save enormously on interest over the life of the loan. For most loans, even this small amount, paid early in the mortgage, could offer big savings in interest and length of the loan.
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