Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments which go toward the loan principal. People employ various techniques to meet this goal. Making a single extra payment one time per year is perhaps the easiest to track. But some people can't pull off this huge additional expense, so dividing one extra payment into twelve extra monthly payments works too. Another very popular option is to pay half of your payment every other week. The effect here is that you make one extra monthly payment each year. These options differ a little in reducing the total interest paid and shortening payback length, but they will all 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 remember that most mortgages will allow you to make additional payments at any time. Whenever you come into unexpected cash, consider using this rule to pay a one-time additional payment on your principal. If, for example, you receive an unexpected windfall three years into your mortgage, paying a few thousand dollars into your mortgage principal can reduce the period of your loan and save enormously on interest paid over the life of the loan. Unless the loan is quite large, even a few thousand dollars applied early can yield huge benefits over the life of the loan.
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