Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make extra payments which apply to the loan principal. You pay extra on principal by employing various techniques. For many people,Perhaps the simplest way to keep track is to make one additional mortgage payment every year. However, many people won't be able to afford this huge additional expense, so dividing one additional payment into 12 additional monthly payments is a great option too. Finally, you can commit to paying a half payment every other week. These options differ slightly in reducing the total interest paid and shortening payback length, but they will all 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 you should remember that most mortgages allow additional principal payments at any time. You can take advantage of this rule to pay down your mortgage principal any time you come into extra money. If, for example, you receive a large gift or tax refund three years into your mortgage, you could pay a portion of this money toward your mortgage loan principal, resulting in enormous savings and a shortened payback period. Unless the mortgage loan is quite large, even small amounts applied early can produce huge benefits over the duration of the loan.
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