Save on Your Mortgage

There's a simple trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make additional payments that go toward your loan principal. People employ various techniques to meet this goal. Paying one additional payment once every year may be the easiest to arrange. If you can't pay an additional whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Finally, you can commit to paying a half payment every other week. These options differ a little in lowering the final payback amount and shortening payback length, but they will all significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.

Lump-sum Additional Payment

It may not be possible for you to pay more every month or even every year. But it's important to note that most mortgage contracts will allow additional principal payments at any time. You can benefit from this rule to pay extra on your principal when you get some extra money. If, for example, you were to receive a large gift or tax refund just a few years into your mortgage, you could apply a portion of this money toward your mortgage loan principal, resulting in huge savings and a shorter payback period. Unless the mortgage loan is very large, even a few thousand dollars applied early can produce huge benefits over the life of the loan.