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 additional payments which apply toward the principal. Borrowers make this happen in several ways. Making one additional payment once every year may be the easiest to arrange. If you can't afford to pay an extra whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Finally, you can pay a half payment every two weeks. Each of these options yields different results, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages allow you to make additional payments at any time. Whenever you come into unexpected money, you can use this provision to make a one-time additional payment toward principal. If, for example, you were to receive a surprise windfall four years into your mortgage, you could pay this windfall toward your loan principal, which would result in enormous savings and a shortened payback period. For most loans, even this modest amount, paid early enough in the mortgage, could offer big savings in interest and in the 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.