Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments that are applied toward your principal. Borrowers employ various techniques to meet this goal. Making a single additional payment one time a year is probably the easiest to arrange. If you can't pay an extra whole payment in one month, you can divide your payment by 12 and pay that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every two weeks. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly shorten 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 mortgages allow you to make additional payments at any time. You can take advantage of this provision to pay down your mortgage principal any time you come into extra money.
If, for example, you receive a large gift or tax refund five years into your mortgage, you could apply this money toward your loan principal, resulting in enormous savings and a shorter loan period. For most loans, even a relatively modest amount, paid early enough in the loan period, could offer huge savings in interest and in the length of the loan.
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