Here's a simple trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make additional payments which are applied toward the loan principal. You can do this in several ways. Paying one extra payment one time a year may be the easiest to keep track of. Of course, some people will not be able to afford such a large extra payment, so dividing an additional payment into twelve extra monthly payments is a fine option too. Another very popular option is to pay half of your payment every other week. The effect here is that you make one additional monthly payment in a year. These options differ a little in reducing the total interest paid and reducing payback length, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. But remember that most mortgages will allow you to make additional payments at any time. You can benefit from this provision to pay down your principal any time you come into extra money.
Here's an example: a few years after buying your home, you receive a larger than expected tax refund,a very large legacy, or a cash gift; , you could apply this windfall toward your loan principal, resulting in significant savings and a shortened loan period. Unless the loan is quite large, even modest amounts applied early can yield huge savings over the duration of the loan.
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