Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars in interest: Make extra payments that are applied toward your principal. Borrowers make this happen in several different ways. Making 1 additional full payment one time per year may be the easiest to arrange. If you can't pay an extra whole payment all at once, you can divide that payment by 12 and write a check for that additional amount monthly. Another option is to pay a half payment every two weeks. The effect here is that you will make one additional monthly payment every year. Each option yields slightly different results, but each will significantly shorten the duration of your mortgage and lower the total interest you will pay over the life of the loan.
It may not be possible for you to pay extra every month or even every year. Remember that almost all mortgage contracts will allow you to pay extra on your principal at any time. You can take advantage of this rule to pay down your mortgage principal any time you come into extra money.
Here's an example: several years after buying your home, you receive a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , paying several thousand dollars into your home's principal can shorten the duration of your loan and save enormously on mortgage interest over the duration of the mortgage loan. Unless the mortgage loan is very large, even a few thousand dollars applied early can produce huge benefits over the life of the loan.
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