There's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars over the course of your loan: Make additional payments which go to the loan principal. Borrowers pay extra in a few ways. Paying one additional payment one time every year is perhaps the simplest to arrange. 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 option is to pay half of your payment every other week. The result is you will make one extra monthly payment in a year. Each option yields slightly different results, but they will all significantly shorten the duration of your mortgage and lower the total interest paid over the duration of the loan.
Some folks can't manage extra payments. But remember that most mortgage contracts allow additional payments at any time. Any time you come into unexpected money, you can use this provision to pay an additional one-time payment on principal.
For example: five years after moving into your home, you receive a very large tax refund,a large legacy, or a non-taxable cash gift; , you could pay this windfall toward your loan principal, which would result in enormous savings and a shortened loan period. For most loans, even a small amount, paid early in the mortgage, could offer big savings in interest and length of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.