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How to Shorten Your Mortgage

by Steve Lander, studioD

As long as your mortgage doesn't have a prepayment penalty, shortening its length is actually very simple. You really don't have to buy special software, set up a complicated web of accounts or sign up for a special payment plan and pay its setup fee. All that you need to do is to send your lender as much extra money as you can as often as you can and have it applied to your principal balance.

Review your mortgage's terms to make sure that it doesn't have a prepayment penalty. If your loan has a prepayment penalty, you could end up having to pay extra money for the right to make extra payments or pay it off early. If it doesn't have a prepayment penalty, though, you can make extra payment or pay the note off early.

Contact your lender to find out how to send in extra money toward the principal on your mortgage. Some lenders will take extra payments and apply them toward future payments on your loan unless you tell them to apply it to the principal.

Pay as much extra as you can every month. Even small payments make a difference. For example, if you have a $200,000 30-year mortgage at 4.25 percent, your monthly payment should be $983.88. Spending an extra $116.12 to round it up to $1,100 per month would pay the loan off in 24 years and a few months. If you could afford to pay an extra $400 per month for a total monthly payment of $1,383.88, you'd be paid off in just under 17 years.

Make two extra half payments if you get paid every two weeks instead of twice a month. If you send in an extra half-check in months when you get three paychecks, you probably won't miss the money, and you'll be paying additional principal. Depending on your loan's terms, doing this just by itself can shave four years or more off of the time it takes to pay off a 30-year mortgage. This is exactly how biweekly payment plans, for which you usually have to pay a setup fee, work.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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