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Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make additional payments which are applied toward the principal. People accomplish this goal in a few ways. For many people, perhaps the easiest way to keep track is by making one extra payment a year. If you can't afford to pay an additional whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Finally, you can pay a half payment every other week. These options differ a little in reducing the total interest paid and reducing payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.
Additional One-time payment
Some people can't manage any extra payments. But it's important to note that most mortgages allow you to make additional principal payments at any time. You can benefit from this rule to pay extra on your mortgage principal any time you get some extra money.
If, for example, you receive a very large gift or tax refund four years into your mortgage, paying a few thousand dollars into your mortgage principal can shorten the repayment duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. Unless the mortgage loan is quite large, even small amounts applied early in the loan period can produce huge savings over the duration of the loan.
At Affordable Mortgage Financing LLC., we answer questions about money-saving strategies every day. Call us at (608) 372-9222.