Save Big on your Mortgage

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There's a trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make extra payments that are applied to your principal. Borrowers pay extra in several ways. Making one additional payment once every year is likely the simplest to track. If you can't afford to pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Finally, you can pay half of your mortgage payment every other week. These options differ slightly 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.

Lump-sum Additional Payment

Some borrowers just can't make extra payments. But it's important to note that most mortgage contracts will allow additional principal payments at any time. You can take advantage of this provision to pay down your mortgage principal when you get some extra money. Here's an example: a few years after moving into your home, you receive a huge tax refund,a very large inheritance, or a cash gift; , paying a few thousand dollars into your mortgage principal can reduce the period of your loan and save enormously on interest paid over the life of the mortgage loan. For most loans, even a modest amount, paid early in the mortgage, could offer huge savings in interest and in the duration of the loan.