Simple Ways to Save Big on Your Mortgage

There's a trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make extra payments which go to your loan principal. Borrowers make this happen in a few ways. Paying one extra full payment one time a year is likely the simplest to keep track of. But some folks can't swing such an enormous additional payment, so splitting a single additional payment into 12 additional monthly payments is a fine option too. Another very popular option is to pay a half payment every other week. The result is you make one additional monthly payment each year. These options differ slightly in reducing the final payback amount and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.

Lump-sum Additional Payment

Some people just can't make any extra payments. But you should remember that most mortgage contracts allow you to make additional payments at any time. Whenever you come into unexpected money, you can use this rule to make an additional one-time payment on your mortgage principal. If, for example, you were to receive an unexpected windfall five years into your mortgage, investing several thousand dollars into your home's principal will reduce the period of your loan and save enormously on mortgage interest paid over the life of the mortgage loan. For most loans, even a small amount, paid early enough in the mortgage, could offer big savings in interest and duration of the loan.

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