How to Reduce Your Mortgage

 It is possible just by one additional Mortgage payment a year.

There's a simple way to significantly reduce the length of your mortgage and save you thousands of dollars. The method is to make one extra mortgage payment a year and apply that payment toward your loan's principal. This method of extra-principal payment should be considered after conservative evaluation, analysis, and comparing of  benefits, driving from principle of leverage, alternative investment, and annual mortgage interest income tax deductibility of the fully amortized loan; versus paying extra-payment applicable to loan principal in order to reduce both the amount of paid interest and duration of the mortgage.  

Keep in mind that most mortgages will permit you to make additional payments  up to 20% of remaining principal balance of the loan at any time each year without prepayment penalty charges.

This is the method being used by "Bi-Weekly Mortgage Reduction Services" and "Bi-Weekly Mortgage Savings Programs". Only, when you do it yourself, you don't pay a third party unnecessary set-up costs and fees!

Example: $100,000 loan, 30-year mortgage, 6.5% fixed interest rate

 One-time Payment

It may not be possible for you to increase your monthly mortgage payment.  Perhaps, five-years after moving into your home you receive a larger than expected tax return, or an inheritance or a non-taxable cash gift.  You could apply this money toward your loan's principal, resulting in significant savings and a shorter loan period.

Example:

With a $100,000, 30-year, 6.5% fixed interest rate mortgage loan, the borrower will pay a total of $227,542.98 to pay back the loan in 30 years. That equals $127,542.98 in interest payments.

If the same borrower makes a one-time $5,000 payment the first day of year 6, he/she will pay a total of $204,710.75 and pay off the loan in 27 years (324 months). That's a savings of $22,832.23 in interest.