Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make extra payments that are applied toward the principal. People make this happen in a few ways. For many people,Perhaps the simplest way to organize this process is to make one extra mortgage payment every year. However, some people won't be able to pull off this huge extra expense, so splitting an additional payment into twelve additional monthly payments works as well. Finally, you can commit to paying half of your mortgage payment every other week. These options differ a little in lowering the final payback amount and shortening payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay more every month or even every year. But remember that most mortgage contracts allow additional principal payments at any time. Whenever you come into unexpected money, consider using this rule to make an additional one-time payment toward your principal.
If, for example, you were to receive a very large gift or tax refund three years into your mortgage, paying several thousand dollars into your home's principal can significantly shorten the duration of your loan and save enormously on mortgage interest over the duration of the mortgage loan. Unless the loan is quite large, even a few thousand dollars applied early in the loan period can yield huge savings over the life of the loan.
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