Here's a simple trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make extra payments which apply to the principal. You pay against principal by employing various techniques. Paying a single extra full payment once a year is perhaps the simplest to keep track of. If you can't pay an additional whole payment all at once, you can divide that payment by 12 and pay that additional amount monthly. Another 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 a little in reducing the total interest paid and shortening payback length, but each will significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay extra every month or even every year. But it's important to note that most mortgage contracts will allow you to make additional principal payments at any time. Any time you get some extra money, consider using this rule to pay an additional one-time payment on your mortgage principal.
Here's an example: five years after buying your home, you receive a larger than expected tax refund,a very large inheritance, or a cash gift; , you could apply a portion of this money toward your mortgage loan principal, which would result in enormous savings and a shorter payback period. For most loans, even this relatively small amount, paid early enough in the mortgage, could offer big savings in interest and in the duration of the loan.
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