Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars in interest: Make extra payments that are applied toward your loan principal. You pay extra on principal in various ways. Paying 1 extra full payment once a year is probably the easiest to keep track of. If you can't afford to pay an additional whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another popular option is to pay a half payment every other week. The result is you make one extra monthly payment in a year. These options differ a little in lowering the final payback amount and reducing payback length, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the life of the loan.
Some people just can't make extra payments. But you should remember that most mortgages allow you to make additional payments at any time. Whenever you come into unexpected money, consider using this provision to make a one-time additional payment toward your mortgage principal.
If, for example, you receive an unexpected windfall four years into your mortgage, you could apply a portion of this windfall toward your mortgage loan principal, resulting in huge savings and a shorter payback period. Unless the mortgage loan is quite large, even modest amounts applied early in the loan period can produce huge savings over the duration of the loan.
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