Here's a simple trick to reduce the repayment period of your mortgage and save thousands over the course of your loan: Make extra payments that go toward your loan principal. You can accomplish this in several ways. For many people,Perhaps the easiest way to keep track is by making one additional mortgage payment per year. If you can't afford to pay an extra whole payment in one month, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another option is to pay half of your payment every other week. The result is you make one additional monthly payment every year. These options differ a little in reducing the total interest paid and shortening payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. But it's important to note that most mortgage contracts allow you to make additional payments at any time. Any time you come into extra cash, consider using this rule to make an additional one-time payment toward your mortgage principal.
If, for example, you were to receive an unexpected windfall three years into your mortgage, investing several thousand dollars into your home's principal will 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 a relatively small amount, paid early enough in the loan period, could offer big savings in interest and length of the loan.
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