You can make extra payments whenever you feel so, but the amounts will be usually limited to the maximum of 20% of the original loan’s balance per year while the penalty period lasts (usually the first 3 or 5 years). Only amounts above the 20% are penalized. When the prepayment penalty period is over you are free to make as many extra payments and as often as you feel comfortable with, unless there are some very special provisions in your mortgage contract that may prevent you from doing so.

A borrower has to pay Private Mortgage Insurance (PMI) only if he cannot make a 20% down payment. So, the ways to avoid the insurance are the ways to find enough cash to be able to pay at least 20% of the price of the property in question. Nowadays, the following options are available: a second mortgage; a “piggyback” mortgage; and lender-paid mortgage insurance.

If you already have a mortgage with PMI, you have to bear in mind that you have all the right to have PMI terminated as soon as the outstanding balance hits the 80% of the purchase (or recently appreciated) price of your property. “Recently appreciated” is your opportune key to freedom. If your property has appreciated in value, the absolute amount of 80% of its current price is higher. What’s your advantage? Say, you have a property that was $100.000 worth when you bought it. 80% of this amount is $80.000. This is the magic number that allows you to cancel PMI. You have been paying the mortgage off for some time and your current outstanding balance is $90.000. If your home has appreciated, say, $10.000 through these same years, its current value is $110.000. 80% of this amount is $88.000, which means that with your outstanding balance of $90.000 you are only $2.000 (not $10.000) away from canceling PMI. Neat, isn’t it? Terminating the insurance, however, is not an easy business. Read about the troubles and tribulations involved in my special article. Yet, just one more thing that I want to draw your attention to – the appreciated value of the house has to be documented by an appraiser, accepted by your lender. The procedure is not cheap, so you have to see first if the appraisal will really save you anything in the long run.

Another way to shorten your PMI period is good old extra payments towards the principal. If your mortgage carries no prepayment penalties (any more) each extra penny towards the principal will bring you closer to the 80% margin.

You have to analyze, what exactly your period payment consists of. The two biggest parts are the principal and the interest. In the early years they will very likely be accompanied by PMI. Under other circumstances unchanged, reducing any of these three components will result is a lower monthly payment.

First of all, PMI has to be terminated as soon as the outstanding balance hits the 80% of the purchase (or recently appreciated) price of your property. If you are ready to wait that long, that is. Going down from, say, 90% to 80% can take over 10-years! Terminating the insurance is not an easy business either, but when you do manage to get rid of it, you will immediately feel the difference. Read about the troubles and tribulations involved in my special article.

The amount paid towards the interest is a percentage of the outstanding balance (the principal). The lower the balance, the lower the interest payments. If your mortgage carries no principal prepayment penalties (any more), the most effective way to reduce the balance faster is extra payments. Yes, they may cause you some temporal inconvenience, but they do pay off. Simply calculate how much you can afford to invest into an extra payment (one or several) without depriving yourself of too many joys of life, and see how much it will reduce your monthly financial burden.

Cutting the principal part of the monthly payments down is not really recommended as it will slow down the process of the mortgage debt repayment. If you are desperate, you can try to refinance into an interest-only mortgage (your monthly payment will include no principal part at all for a certain period of time) or into a longer-term mortgage. Say, you have 10 years left on your current mortgage and you refinance for the same outstanding amount into a 30-year mortgage. The same sum gets stretched over a longer period of time and thus each monthly payment is lower. However, all other conditions of the new mortgage have to be favorable. This way also requires some cash, for refinancing is not cheap.

It a sort of is. The main distinction between the two is the number of period payments made within each mortgage year. You may have a conventional mortgage with a period payment due twice a month, which is very close to, but not exactly every other week. With a conventional mortgage you make 12 (months)* 2 (payments a month) = 24 payments a year. If you pay every other week instead, you will make 52 (weeks in a year)/2 = 26 payments, which means that without too much effort you can pay your mortgage off sooner. In fact, a biweekly mortgage based on a 7% 30 year conventional Fixed Rate Mortgage plan pays off in 23 years 11 months.

However, a biweekly mortgage is not always the best option. Alternatively, you can achieve the same result with a conventional mortgage and some extra payments, if your mortgage carries no prepayment penalties. The advantage of this system is that you are free to make the extra payments whenever you find it appropriate. With a biweekly plan you are obliged to pay every other week. It is pretty much a matter of discipline, which you may or may not lack in the mortgage payment business.

For more details read Biweekly Mortgages.

Yes. Moreover, the sooner you pay off your mortgage, the more cash you save for yourself as never-charged interest. The most reliable way to achieve such a spectacular result is extra payments towards the principal. A mere $20 on top of your regular monthly payment can result in roughly $24,000 of interest savings! The idea is that your extra payments reduce the principal faster, the amount charged as the interest on the principal shrinks, too. You are free from your mortgage debt sooner and the total amount of cash paid towards the interest is considerably lower. How much sooner and how much lower depends on how much extra you are ready to pay every (or not every) month. If you are not sure you are disciplined enough to make regular extra payments yourself, you may consider a bi-weekly mortgage repayment plan as an alternative.

A very sophisticated, but quite an effective method to accelerate certain types of mortgages is a so-thought Australian ingenious invention called simply “Mortgage Acceleration”. The concept involves an interest only loan and a Home Equity Line of Credit (HELOC). It is not simple and the whole procedure has to be very well thought over and balanced to suit every particular situation. I am fighting the temptation to explain here how it works, because I want to make sure you consult a professional in person to work out all the details.