There's a 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 toward the loan principal. Borrowers make this happen in several ways. Paying a single extra full payment one time per year is likely the easiest to arrange. But some people won't be able to pull off such an enormous extra payment, so splitting a single extra payment into twelve extra monthly payments is a fine option too. Another very popular option is to pay a half payment every other week. The effect here is that you will make one additional monthly payment each year. These options differ a little in reducing the final payback amount and shortening payback length, but each will significantly reduce the duration of your mortgage and lower the total interest paid over the duration of the loan.
Some folks can't manage extra payments. But it's important to note that most mortgage contracts will allow you to make additional principal payments at any time. You can benefit from this rule to pay down your principal when you come into extra money.
Here's an example: five years after buying your home, you receive a very large tax refund,a very large inheritance, or a non-taxable cash gift; , you could apply this windfall toward your mortgage loan principal, resulting in enormous savings and a shorter loan period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can produce huge benefits over the life of the loan.
Do you have a question regarding a mortgage program?