Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars over the course of your loan: Make additional payments that are applied toward your loan principal. Borrowers use different methods to meet this goal. Making one extra full payment one time every year is probably the simplest to arrange. But some folks will not be able to afford such an enormous extra expense, so splitting one additional payment into twelve extra monthly payments is a fine option too. Another option is to pay half of your payment every other week. The result is you will make one additional monthly payment in a year. Each option yields slightly different results, 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. But remember that most mortgages will allow additional payments at any time. You can take advantage of this rule to pay down your principal when you get some extra money. If, for example, you were to receive a large gift or tax refund just a few years into your mortgage, you could apply a portion of this money toward your mortgage loan principal, resulting in enormous savings and a shortened payback period. Unless the loan is very large, even a few thousand dollars applied early in the loan period can produce huge savings over the duration of the loan.
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