There's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make extra payments that apply to your principal. Borrowers can accomplish this using a few different techniques. Paying one extra full payment one time per year is probably the simplest to track. But some people will not be able to pull off such an enormous extra expense, so dividing one additional payment into 12 extra monthly payments works as well. Another option is to pay a half payment every two weeks. The result is you will make one additional monthly payment every year. These options differ slightly in reducing the total interest paid and reducing payback length, but they will all significantly shorten 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 it's important to note that most mortgage contracts allow additional principal payments at any time. Whenever you come into extra money, you can use this provision to pay an additional one-time payment on your mortgage principal. Here's an example: five years after buying your home, you receive a huge tax refund,a very large legacy, or a non-taxable cash gift; , investing several thousand dollars into your home's principal will significantly shorten the repayment period of your loan and save a huge amount on interest over the duration of the loan. Unless the mortgage loan is very large, even modest amounts applied early in the loan period can yield huge savings over the duration of the loan.
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