Here's a simple trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make extra payments that apply to the loan principal. You pay extra on principal by employing various techniques. For many people,Perhaps the easiest way to organize this process is to make 1 extra payment every year. However, many folks will not be able to swing such an enormous additional expense, so dividing a single extra payment into 12 extra monthly payments works as well. Finally, you can pay half of your mortgage payment every two weeks. These options differ slightly in reducing the total interest paid and shortening payback length, but each will significantly reduce the duration 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. Remember that most mortgage contracts will allow you to pay extra on your principal at any point during repayment. Whenever you get some unexpected cash, you can use this rule to pay an additional one-time payment toward your mortgage principal. If, for example, you were to receive a surprise windfall five years into your mortgage, you could apply this windfall toward your mortgage loan principal, which would result in enormous savings and a shortened payback period. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer big savings in interest and in the length of the loan.
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