Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars in interest: Make additional payments that are applied to the loan principal. Borrowers use different methods to meet this goal. Making 1 extra full payment once a year is perhaps the simplest to track. If you can't pay an extra whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Finally, you can pay a half payment every other week. These options differ slightly in lowering the total interest paid and reducing payback length, 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 people just can't make extra payments. But it's important to note that most mortgage contracts will allow you to make additional payments at any time. Any time you come into unexpected cash, consider using this provision to pay a one-time additional payment toward your mortgage principal.
If, for example, you were to receive a very large gift or tax refund five years into your mortgage, paying a few thousand dollars into your mortgage principal can shorten the repayment period of your loan and save a huge amount on interest over the duration of the mortgage loan. For most loans, even this relatively small amount, paid early enough in the loan period, could offer huge savings in interest and length of the loan.
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