Here's a simple trick to reduce the repayment period of your mortgage and save you thousands in interest: Make additional payments which apply toward the principal. Borrowers can pay more on principal in various ways. For many people,Perhaps the simplest way to organize this process is by making 1 extra mortgage payment every year. But some folks won't be able to afford such an enormous additional expense, so dividing a single additional payment into 12 extra monthly payments is a great option too. Another option is to pay half of your payment every two weeks. The effect here is that you will make one extra monthly payment each year. These options differ a little in lowering the total interest paid and shortening payback length, but they will all significantly shorten the length of your mortgage and lower your total interest paid.
Some folks just can't make any extra payments. But it's important to note that most mortgages will allow you to make additional principal payments at any time. You can benefit from this rule to pay extra on your principal any time you get some extra money.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, investing a few thousand dollars into your mortgage principal will significantly shorten the duration of your loan and save enormously on interest over the duration of the loan. For most loans, even this relatively small amount, paid early enough in the loan period, could offer big savings in interest and duration of the loan.
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