There's a trick to significantly reduce the length of your mortgage and save thousands over the course of your loan: Make extra payments that go toward the principal. Borrowers make this happen in a few different ways. Paying one additional payment once a year is probably the easiest to keep track of. However, some folks can't swing such a large extra payment, so dividing an additional payment into 12 additional monthly payments is a great option too. Another very popular option is to pay half of your payment every other week. The result is you will make one additional monthly payment every year. These options differ slightly in lowering the total interest paid and reducing payback length, but each will significantly reduce the duration 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 mortgage contracts will allow additional payments at any time. Any time you get some unexpected money, you can use this rule to pay an additional one-time payment toward your principal. If, for example, you were to receive a very large gift or tax refund just a few years into your mortgage, paying several thousand dollars into your home's principal can reduce the duration of your loan and save a huge amount on interest paid over the duration of the loan. For most loans, even this relatively small amount, paid early in the loan period, could offer huge savings in interest and in the duration of the loan.
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