Additional Payments Yield Huge Savings

Here's a simple trick to significantly reduce the length of your mortgage and save thousands over the course of your loan: Make additional payments that apply to the principal. Borrowers make this happen in a few different ways. For many people,Perhaps the simplest way to organize this process is by making one extra payment a year. Of course, some folks won't be able to afford such a large extra expense, so splitting an additional payment into twelve additional monthly payments works as well. Finally, you can commit to paying a half payment every other week. Each option produces slightly different results, but each will significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.

One-time Additional Payment

It may not be possible for you to pay extra every month or even every year. Keep in mind that most mortgage contracts will allow you to pay extra on your principal at any point during repayment. You can benefit from this rule to pay extra on your mortgage principal when you get some extra money. Here's an example: five years after buying your home, you get a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , you could apply a portion of this windfall toward your loan principal, which would result in significant savings and a shortened loan period. Unless the mortgage loan is quite large, even a few thousand dollars applied early in the loan period can yield huge benefits over the life of the loan.