There's a trick to significantly reduce the length of your mortgage and save you thousands in interest: Make extra payments that are applied to the principal. Borrowers can do this in several ways. For many people,Perhaps the simplest way to keep track is to make one additional mortgage payment per year. Of course, some people can't afford such a large additional expense, so splitting an additional payment into 12 extra monthly payments is a fine option too. Finally, you can pay a half payment every other week. Each option produces slightly different results, but each will significantly shorten the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Some borrowers just can't make any extra payments. But remember that most mortgage contracts will allow you to make additional principal payments at any time. Any time you come into unexpected money, consider using this provision to make an additional one-time payment on your principal.
If, for example, you receive a very large gift or tax refund just a few years into your mortgage, you could pay a portion of this windfall toward your loan principal, resulting in significant savings and a shorter loan period. Unless the loan is quite large, even a few thousand dollars applied early can produce huge savings over the duration of the loan.
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