Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments that go toward your principal. You can pay more on principal in various ways. Making 1 additional full payment one time every year is likely the easiest to arrange. If you can't afford to pay an extra whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Another popular option is to pay a half payment every other week. The result is you make one additional monthly payment in a year. Each option yields slightly different results, but each will significantly reduce the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. But remember that most mortgages allow you to make additional principal payments at any time. Whenever you come into unexpected money, you can use this provision to make an additional one-time payment toward principal. For example: five years after buying your home, you receive a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , investing a few thousand dollars into your mortgage principal can reduce the repayment period of your loan and save enormously on interest paid over the duration of the loan. For most loans, even a small amount, paid early enough in the mortgage, could offer big savings in interest and in the length of the loan.
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