If after reading the title of this article you think that you will reduce the cost of your house from $150,000 to $100,000 then you are just one of the millions of people who have been misled by the mortgage industry. 

When you "buy" a house for $150,000 with a 30-year loan at an interest rate of 5% what you are actually doing is signing a 30 year contract with a bank to pay $280,000; $150,000 of your principal and a whopping $130,000 in interest.  With that reality in mind, there are ways to reduce that $130,000 interest amount by $50,000 or more just by making simple adjustments to your loan.

The amount of interest you pay on anything is directly tied to the length of your loan.  The longer you have the loan the more interest builds up and the more interest you are paying to the bank.  For this reason banks will always offer to refinance and extend your loan period.  During the height of the housing bubble banks were routinely offering deals that may look good on the surface, but are designed to keep you in debt until you retire or die.

40-year mortgages - keep you paying more interest to the bank, while nominally reducing your payment

Interest-free loans that have you building ZERO equity while 100% of your payment fills the bank coffers.

Adjustable Rate Mortgages (ARMs) that "hook you" with a small payment for a few years but ultimately extend your loan period as you are forced to renegotiate them at some point to actually pay off your mortgage.

Millions of Americans have fallen into this financial trap of lower payments now higher payments later.  This article talks about how to do the OPPOSITE of what the banks want you to do - pay off your loan early and save yourself tens of thousands of dollars.

The first thing to internalize before you buy a home is that you do not have to accept the loan terms that the bank tries to force upon you.  They may say "You need a 30 year mortgage" but you can say "No, I want to pay my loan off in 20 years".  If the bank won't give you a 20-year mortgage, walk away and go to another bank.  If you are qualified and can afford the payments on a 20-year mortgage there is a 100% chance that a bank (probably yours) will write the loan for you.  Several banks and financial outfits are touting this as their newfound wisdom and are actually promoting this "pick your own duration loan" (ex: Quicken YOURgage).

Now that we have established that you can get the loan term that YOU choose, here is an example of the benefit.  The following chart shows how you can save almost $50,000 by simply changing your mortgage from a 30-year to a 20-year.  The best part is that your monthly payment will only increase by $172 per month. (click here to run the mortgage calculator yourself)

As you can see thousands of dollars in interest can be saved and used for investment to BUILD wealth instead of lining the pockets of a bank. 

If you want to keep your mortgage "as-is" but still want to get out of the bank trap early there are other ways to pay your mortgage off quicker:

Make 1 extra payment per year (use your tax refund to make the payment)

Pay in 4 week cycles instead of monthly (the result is making 13 payments per year instead of 12)

Pay an extra amount per month (don't refinance, just pay $200 extra per month and mark it as "pay toward principal")

When dealing with banks always remember: banks exist to take your money, not make you money.  Taking your money in the forms of interest and fees and reinvesting it is how they generate their profits.  This is not evil, its just the way banks work.  Instead of helping banks get richer, help yourself get richer by breaking the interest cycle and using your money to invest in you and your family's future.