Here's a simple trick to reduce the repayment period of your mortgage and save you thousands over the course of your loan: Make extra payments that go to the principal. People accomplish this goal in a few different ways. For many people,Perhaps the simplest way to keep track is by making one extra mortgage payment per year. If you can't afford to pay an additional whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Another popular option is to pay half of your payment every other week. The result is you will make one additional monthly payment each year. Each of these options yields different results, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay extra every month or even every year. But you should remember that most mortgage contracts allow additional payments at any time. Any time you come into extra money, consider using this provision to make an additional one-time payment toward mortgage principal.
If, for example, you were to receive a very large gift or tax refund three years into your mortgage, investing several thousand dollars into your mortgage principal will reduce the duration of your loan and save a huge amount on interest paid over the duration of the mortgage loan. Unless the mortgage loan is very large, even modest amounts applied early can produce huge benefits over the duration of the loan.
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