Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make additional payments that apply to your principal. People accomplish this goal in several different ways. Paying one additional payment once per year is perhaps the easiest to track. If you can't pay an additional whole payment all at once, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another popular option is to pay half of your payment every other week. The result is you make one extra monthly payment every year. Each of these options produces slightly different results, but they will all significantly reduce the duration 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. Remember that almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. Whenever you get some extra money, you can use this rule to pay an additional one-time payment on mortgage 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 money toward your mortgage loan principal, resulting in enormous savings and a shorter payback period. For most loans, even this modest amount, paid early enough in the loan period, could offer huge savings in interest and duration of the loan.
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