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 toward your loan principal. You can accomplish this in several ways. Making 1 extra full payment once per year may be the simplest to arrange. If you can't pay an extra whole payment in one month, you can divide your payment by 12 and pay that additional amount monthly. Finally, you can commit to paying a half payment every two weeks. These options differ a little in lowering the final payback amount and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay more every month or even every year. Keep in mind that almost all mortgage contracts will permit you to make additional payments to your principal at any point during repayment. Any time you get some unexpected money, consider using this rule to pay an additional one-time payment toward mortgage principal.
If, for example, you receive a very large gift or tax refund three years into your mortgage, paying several thousand dollars into your mortgage principal can significantly reduce the period of your loan and save enormously on mortgage interest over the life of the loan. Unless the mortgage loan is quite large, even a few thousand dollars applied early can yield huge savings over the duration of the loan.
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