There's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments which are applied to the principal. Borrowers can accomplish this in various ways. Making 1 additional payment once a year is perhaps the simplest to keep track of. But some folks won't be able to afford such a large additional payment, so dividing one additional payment into twelve additional monthly payments works as well. Finally, you can pay a half payment every two weeks. Each of these options 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. Remember that almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. Whenever you come into unexpected money, you can use this provision to pay an additional one-time payment toward your mortgage principal. If, for example, you were to receive a surprise windfall five years into your mortgage, paying several thousand dollars into your mortgage principal will significantly reduce the repayment period of your loan and save a huge amount on mortgage interest paid over the duration of the mortgage loan. For most loans, even this modest amount, paid early enough in the mortgage, could offer big savings in interest and length of the loan.
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