Turning a 40-year Mortgage into a 30-year Mortgage

\r\nTaking out a 40-year loan often can help a homebuyer offset the payment shock of a new home. But once a homeowner adjusts to their payment, what would be the best way to turn a 40-year mortgage into a regular 30-year mortgage? The easiest and fastest way is to make an extra payment towards the principle of a loan, or to include more towards principle with each mortgage payment.\r\n

By paying one or two extra payments a year towards the principle of a mortgage, a homeowner can cut their mortgage term to nearly half. In essence, if a homeowner has a $200,000 40-year term fixed rate mortgage that is $2000 a month with a 7.00% interest rate, an additional $4000 towards principle per year would bring the term down to around 23 years. By paying an additional $200 per month with the same scenario, the term would be reduced to a 29-year term. Homeowners should be sure, however, that their mortgage does not have a prepayment penalty that would affect the additional amounts towards principle.\r\n