Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments that go toward your loan principal. Borrowers pay extra on principal by employing various techniques. For many people,Perhaps the simplest way to keep track is by making 1 additional payment per year. Of course, many folks will not be able to pull off such an enormous additional expense, so splitting a single extra payment into 12 additional monthly payments works too. Finally, you can pay half of your mortgage payment every other week. These options differ slightly in reducing the total interest paid and shortening payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.
Some people can't manage extra payments. But you should remember that most mortgage contracts will allow you to make additional principal payments at any time. Whenever you get some unexpected money, you can use this provision to make a one-time additional payment on your mortgage principal. If, for example, you receive a large gift or tax refund four years into your mortgage, paying a few thousand dollars into your mortgage principal will significantly reduce the repayment duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. For most loans, even a small amount, paid early in the loan period, could offer huge savings in interest and in the duration of the loan.
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