Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments which apply to the loan principal. People pay extra in a few different ways. For many people,Perhaps the simplest way to keep track is by making one extra payment per year. If you can't afford to pay an additional whole payment all at once, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another option is to pay a half payment every other week. The effect here is that you make one additional monthly payment in a year. These options differ slightly in reducing the final payback amount and shortening payback length, but they will all significantly shorten the duration of your mortgage and lower the total interest you will pay over the life of the loan.
It may not be possible for you to pay extra every month or even every year. Remember that most mortgages will permit you to make additional payments to your principal at any time. Any time you come into extra money, consider using this provision to pay a one-time additional payment on principal.
Here's an example: five years after buying your home, you get a very large tax refund,a very large inheritance, or a non-taxable cash gift; , you could pay a portion of this money toward your mortgage loan principal, resulting in significant savings and a shortened payback period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
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