There's a trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments that go toward the principal. Borrowers accomplish this goal in a few different ways. Making one extra full payment one time per year is likely the easiest to track. If you can't pay an additional whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Another option is to pay a half payment every two weeks. The effect here is that you will make one extra monthly payment in a year. Each of these options yields slightly different results, but they will all significantly shorten the length of your mortgage and lower the total interest you will pay over the life of the loan.
Some people can't manage any extra payments. But remember that most mortgages allow additional payments at any time. Whenever you get some unexpected cash, consider using this provision to make a one-time additional payment toward your principal. If, for example, you were to receive a very large gift or tax refund three years into your mortgage, investing several thousand dollars into your home's principal will reduce the period of your loan and save a huge amount on mortgage interest over the life of the loan. For most loans, even this small amount, paid early in the loan period, 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.