There's a trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments that go toward the loan principal. People pay extra in a few different ways. Paying one extra full payment once a year is likely the easiest to keep track of. But many folks won't be able to afford such a large extra expense, so splitting an extra payment into 12 extra monthly payments works too. Another popular option is to pay a half payment every two weeks. The result is you make one extra monthly payment in a year. These options differ a little in reducing the total interest paid and shortening payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest you will pay 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 almost all mortgages will allow you to make additional payments to your principal at any time. You can benefit from this provision to pay extra on your principal when you come into extra money. If, for example, you receive a large gift or tax refund three years into your mortgage, investing a few thousand dollars into your home's principal can reduce the repayment period of your loan and save enormously on interest over the life of the mortgage loan. For most loans, even this relatively small amount, paid early enough in the mortgage, could offer big savings in interest and in the duration of the loan.
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