Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make additional payments that apply toward your loan principal. You can pay extra on principal in many different ways. Paying 1 extra full payment once a year is probably the easiest to track. If you can't afford to pay an extra whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Another very popular option is to pay half of your payment every two weeks. The effect here is that you will make one additional monthly payment in a year. Each of these options yields different results, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the life of the loan.
Some folks can't manage any extra payments. But you should remember that most mortgage contracts allow you to make additional payments at any time. You can benefit from this provision to pay down your mortgage principal when you get some extra money.
Here's an example: five years after buying your home, you get a larger than expected tax refund,a large inheritance, or a cash gift; , you could pay this windfall toward your mortgage loan principal, resulting in huge savings and a shorter payback period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can yield huge benefits over the life of the loan.
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