Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make extra payments that go toward your principal. You can pay against principal by employing various techniques. For many people,Perhaps the easiest way to keep track is to make 1 extra payment per year. But some folks will not be able to pull off such a large extra payment, so splitting an additional payment into twelve additional monthly payments is a fine option too. Another option is to pay half of your payment every two weeks. The effect here is that you make one extra monthly payment each year. These options differ slightly in lowering the final payback amount and reducing payback length, but each will significantly reduce the length 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. Keep in mind that most mortgages will allow you to pay extra on your principal at any time. Any time you come into unexpected money, you can use this rule to pay an additional one-time payment toward your principal.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, paying a few thousand dollars into your mortgage principal can significantly shorten the repayment duration of your loan and save a huge amount on mortgage interest over the life of the loan. For most loans, even a small amount, paid early enough in the loan period, could offer huge savings in interest and in the duration of the loan.
Do you have a question regarding a mortgage program?