Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make additional payments which go to your principal. People employ various techniques to accomplish this goal. Making a single extra full payment one time a year is perhaps the easiest to track. But many people can't pull off such an enormous extra payment, so dividing one additional payment into twelve 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 will make one extra monthly payment in a year. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life 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. But it's important to note that most mortgages will allow additional payments at any time. You can benefit from this rule to pay down your principal when you get some extra money.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, paying several thousand dollars into your home's principal can significantly reduce the duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. Unless the mortgage loan is quite large, even small amounts applied early in the loan period can produce huge savings over the life of the loan.
Alternative Mortgage Group can walk you the mortgage process. Give us a call at 561-395-4264.