Additional Payments Provide Huge Savings
There's a trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make extra payments which go toward your loan principal. Borrowers make this happen in several ways. Making one additional payment one time a year is probably the easiest to track. If you can't afford to pay an additional whole payment all at once, you can divide that payment by 12 and write a check for that additional amount monthly. Finally, you can commit to paying a half payment every other week. Each of these options produces slightly different results, but they will all significantly reduce the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Lump-sum Additional Payment
It may not be possible for you to pay more every month or even every year. Remember that almost all mortgages will permit you to make additional payments to your principal at any time. Whenever you come into extra cash, you can use this rule to make a one-time additional payment toward your principal.
If, for example, you receive a large gift or tax refund three years into your mortgage, paying a few thousand dollars into your mortgage principal will significantly reduce the duration of your loan and save a huge amount on mortgage interest over the life of the mortgage loan. Unless the loan is quite large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
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