Here's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make extra payments that apply to the loan principal. Borrowers can accomplish this in several ways. Making one extra full payment one time every year is perhaps the simplest to arrange. If you can't afford to pay an extra whole payment in one month, you can divide that payment by 12 and write a check for that additional amount monthly. Another very popular option is to pay a half payment every two weeks. The effect here is that you will make one extra monthly payment every year. Each of these options produces different results, 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 extra every month or even every year. But remember that most mortgages allow you to make additional principal payments at any time. Any time you come into unexpected money, consider using this rule to make a one-time additional payment toward mortgage principal. If, for example, you receive a large gift or tax refund just a few years into your mortgage, you could apply a portion of this money toward your loan principal, which would result in significant savings and a shortened loan period. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer big savings in interest and length of the loan.
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