Big Savings on Interest: Available to Anyone with a Mortgage
There's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make additional payments that go toward your loan principal. Borrowers make this happen in several different ways. Making one additional payment once per year is perhaps 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 pay half of your mortgage payment every two weeks. Each option produces different results, but each will significantly reduce the length of your mortgage and lower your total interest paid.
Lump Sum Extra Payment
It may not be possible for you to pay extra every month or even every year. But it's important to note that most mortgage contracts will allow additional principal payments at any time. Whenever you get some unexpected cash, you can use this rule to make a one-time additional payment on your principal. If, for example, you receive a large gift or tax refund five years into your mortgage, investing a few thousand dollars into your home's principal will reduce the repayment period of your loan and save a huge amount on interest paid over the duration of the loan. For most loans, even this modest amount, paid early enough in the loan period, could offer huge savings in interest and in the length of the loan.