There's a trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make extra payments that apply to the principal. You can accomplish this using a few different techniques. Making one extra payment one time per year is perhaps the easiest to arrange. However, some people won't be able to pull off such an enormous additional payment, so dividing one extra payment into 12 extra monthly payments is a great option too. Another popular option is to pay half of your payment every two weeks. The effect here is that you will make one extra monthly payment each year. These options differ a little in lowering the final payback amount and reducing payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay extra every month or even every year. Keep in mind that virtually all mortgage contracts will allow you to pay extra on your principal at any time. Whenever you come into extra money, you can use this provision to make a one-time additional payment toward principal.
If, for example, you receive an unexpected windfall five years into your mortgage, investing several thousand dollars into your home's principal can shorten the period of your loan and save enormously on interest paid over the duration of the loan. For most loans, even a small amount, paid early in the loan period, could offer big savings in interest and length of the loan.
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