Additional Payments Provide Huge Savings
Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make additional payments that go toward your loan principal. You pay more on principal in various ways. Making one additional full payment one time every year is probably 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. Finally, you can pay half of your mortgage payment every two weeks. Each option produces different results, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
Lump Sum Extra Payment
Some folks just can't make extra payments. But remember that most mortgages allow you to make additional principal payments at any time. Whenever you get some extra money, consider using this rule to pay a one-time additional payment toward your principal.
If, for example, you were to receive a surprise windfall four years into your mortgage, you could apply a portion of this money toward your loan principal, resulting in huge savings and a shortened payback period. For most loans, even this modest amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.