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 which are applied toward the principal. People employ various techniques to accomplish this goal. For many people,Perhaps the easiest way to keep track is by making one additional payment a year. However, many people won't be able to afford such a large extra payment, so dividing one additional payment into twelve additional monthly payments is a fine option too. Another popular option is to pay a half payment every two weeks. The result is you will make one additional monthly payment in a year. These options differ slightly in reducing the total interest paid and reducing payback length, but each will significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay more every month or even every year. But remember that most mortgage contracts allow additional principal payments at any time. Whenever you come into extra cash, consider using this rule to make an additional one-time payment toward your mortgage principal. For example: several years after buying your home, you receive a huge tax refund,a very large legacy, or a non-taxable cash gift; , you could pay a portion of this windfall toward your loan principal, resulting in huge savings and a shortened payback period. For most loans, even a relatively small amount, paid early enough in the loan period, could offer big savings in interest and in the duration of the loan.
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