There's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which go to the principal. You pay more on principal in various ways. Paying 1 extra full payment once a year is perhaps the simplest to arrange. If you can't afford to pay an extra whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Finally, you can pay half of your mortgage payment every other week. Each of these options produces different results, but each will 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 almost all mortgage contracts will permit you to make additional payments to your principal at any time. Any time you come into unexpected money, you can use this provision to pay a one-time additional payment on your principal. For example: a few years after buying your home, you receive a huge tax refund,a large legacy, or a non-taxable cash gift; , investing several thousand dollars into your mortgage principal can significantly reduce the period of your loan and save a huge amount on interest over the duration of the loan. For most loans, even this relatively small amount, paid early in the loan period, could offer huge savings in interest and duration of the loan.
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