There's a 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 principal. You can pay extra on principal by employing various techniques. Making a single extra full payment once a year is perhaps the simplest to arrange. Of course, many people can't pull off such a large additional payment, so splitting one extra payment into 12 extra monthly payments works as well. Another popular option is to pay half of your payment every two weeks. The effect here is that you will make one additional monthly payment in a year. These options differ slightly in reducing the total interest paid and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
Some folks just can't make extra payments. But it's important to note that most mortgages will allow additional payments at any time. Whenever you get some unexpected money, you can use this provision to pay an additional one-time payment on principal. For example: a few years after moving into your home, you receive a larger than expected tax refund,a very large inheritance, or a cash gift; , you could pay a portion of this money toward your loan principal, which would result in huge savings and a shorter payback period. Unless the loan is quite large, even modest amounts applied early can produce huge benefits over the duration of the loan.
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