Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make extra payments which are applied toward the principal. Borrowers can pay extra on principal by employing various techniques. Paying one additional payment once every year is probably the easiest to keep track of. However, some people will not be able to pull off this huge additional expense, so splitting a single additional payment into twelve extra monthly payments works too. Finally, you can pay half of your mortgage payment every two weeks. Each option yields different results, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
Lump Sum Extra Payment
It may not be possible for you to pay down your principal every month or even every year. But you should remember that most mortgage contracts allow additional payments at any time. Any time you get some unexpected cash, consider using this rule to make an additional one-time payment on principal.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, you could pay a portion of this money toward your loan principal, resulting in enormous savings and a shorter payback period. Unless the mortgage loan is very large, even a few thousand dollars applied early in the loan period can produce huge benefits over the life of the loan.
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