Mortgage Savings

Here's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make additional payments that are applied to your loan principal. You pay against principal by employing various techniques. For many people,Perhaps the simplest way to keep track is by making one additional mortgage payment a year. If you can't afford to pay an extra whole payment in one month, you can divide your payment by 12 and pay that additional amount monthly. Finally, you can pay a half payment every other week. Each option produces slightly different results, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.

One-time Additional Payment

Some borrowers just can't make extra payments. But remember that most mortgages will allow additional payments at any time. Whenever you come into unexpected money, consider using this rule to make an additional one-time payment on mortgage principal.

If, for example, you receive a very large gift or tax refund three years into your mortgage, you could pay a portion of this windfall toward your mortgage loan principal, resulting in significant savings and a shortened payback period. Unless the mortgage loan is quite large, even modest amounts applied early in the loan period can yield huge benefits over the life of the loan.