Here’s a simple trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make additional payments that are applied to your loan principal. Borrowers employ various techniques to accomplish this goal. Paying a single additional full payment once per year is likely the easiest to arrange. If you can’t pay an extra whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly.
Another popular option is to pay half of your payment every other week. The effect here is that you make one extra monthly payment in a year. These options differ a little in lowering the total interest paid and shortening payback length, but they will all significantly shorten the duration of your mortgage and lower the total interest you will pay over the duration of the loan.
Lump-sum Additional Payment
Some folks can’t manage any extra payments. But remember that most mortgages will allow additional principal payments at any time. You can benefit from this provision to pay extra on your principal any time you get some extra money.
If, for example, you were to receive a very large gift or tax refund three years into your mortgage, paying several thousand dollars into your home’s principal will shorten the period of your loan and save enormously on mortgage interest paid over the life of the loan.
For most loans, even a modest amount, paid early in the mortgage, could offer big savings in interest and length of the loan.
Whether you are first time home buyer, purchasing your dream home, refinancing an outstanding home loan, or consolidating debt, the highly experienced team of mortgage brokers here can help you take that first step toward a financial solution. Located in Sacramento, CA building and maintaining strong and lasting relationships is and has always been our goal!
