Here's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make additional payments that are applied toward your loan principal. Borrowers use different methods to meet this goal. Making one additional full payment one time per year may be the easiest to track. However, many folks won't be able to afford such an enormous additional payment, so splitting a single extra payment into 12 extra monthly payments is a great option too. Another very popular option is to pay half of your payment every two weeks. The result is you make one additional monthly payment in a year. These options differ slightly in reducing the total interest paid and reducing 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 down your principal every month or even every year. Keep in mind that most mortgage contracts will permit you to pay extra on your principal at any point during repayment. Any time you come into unexpected cash, consider using this rule to pay an additional one-time payment toward principal. If, for example, you receive an unexpected windfall just a few years into your mortgage, paying several thousand dollars into your mortgage principal can reduce the period of your loan and save enormously on interest over the life of the loan. Unless the loan is very large, even a few thousand dollars applied early in the loan period can produce huge benefits over the life of the loan.
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