Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make additional payments that go to the principal. Borrowers can pay extra on principal by employing various techniques. Paying a single additional full payment one time every year is perhaps the simplest to keep track of. Of course, some people won't be able to swing such an enormous extra expense, so dividing a single extra payment into 12 additional monthly payments is a fine option too. Another very popular option is to pay a half payment every other week. The result is you make one additional monthly payment every year. These options differ a little in lowering the total interest paid and shortening payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the duration of the loan.
Lump Sum Extra Payment
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that almost all mortgages will allow you to pay extra on your principal at any point during repayment. You can benefit from this rule to pay down your principal any time you get some extra money.
For example: several years after buying your home, you get a huge tax refund,a very large legacy, or a cash gift; , you could pay this windfall toward your loan principal, which would result in huge savings and a shorter payback period. For most loans, even a small amount, paid early in the loan period, could offer big savings in interest and duration of the loan.
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