Here's a simple trick to reduce the repayment period of your mortgage and save thousands over the course of your loan: Make extra payments which apply toward the loan principal. You pay against principal in many different ways. Paying 1 extra payment once per year is probably the easiest to arrange. If you can't pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another option is to pay half of your payment every two weeks. The result is you will make one extra monthly payment every year. These options differ a little in lowering the total interest paid and reducing payback length, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay more every month or even every year. But remember that most mortgage contracts allow additional principal payments at any time. Whenever you get some extra cash, consider using this provision to pay an additional one-time payment toward your mortgage principal. Here's an example: several 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 this money toward your mortgage loan principal, which would result in significant savings and a shorter loan period. For most loans, even this small amount, paid early enough in the loan period, could offer big savings in interest and in the duration of the loan.
Joe Wagner answers questions about interest-saving strategies almost every day. Give Joe Wagner a call at 612-327-4544. We know you're busy, so feel free to complete the form below to be contacted by Joe Wagner.
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