Here's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make extra payments that are applied to your principal. Borrowers pay extra in a few different ways. Paying one extra payment once every year may be the simplest to keep track of. But some folks won't be able to afford this huge extra expense, so dividing one additional payment into twelve additional monthly payments is a great option too. Another very popular option is to pay half of your payment every other week. The effect here is that you will make one extra monthly payment in a year. These options differ slightly in lowering the total interest paid and shortening payback length, but they will all significantly shorten the duration of your mortgage and lower the total interest you will pay over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages will allow additional principal payments at any time. Whenever you get some extra money, you can use this provision to pay a one-time additional payment toward mortgage principal. For example: five years after moving into your home, you get a very large tax refund,a large inheritance, or a cash gift; , you could apply this windfall toward your loan principal, resulting in significant savings and a shortened loan period. For most loans, even a relatively modest amount, paid early enough in the loan period, could offer huge savings in interest and length of the loan.
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