Here's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make extra payments that go toward the principal. You can do this using a few different techniques. Making a single additional payment once a year is perhaps the simplest to track. If you can't afford to pay an extra whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Another popular option is to pay a half payment every two weeks. The result is you make one extra monthly payment every year. Each option produces slightly different results, but each will significantly reduce the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay more every month or even every year. But you should remember that most mortgage contracts will allow you to make additional payments at any time. Any time you get some unexpected money, you can use this provision to make an additional one-time payment on your principal.
If, for example, you were to receive a large gift or tax refund five years into your mortgage, investing several thousand dollars into your mortgage principal will shorten the repayment duration of your loan and save enormously on mortgage interest paid over the duration of the loan. For most loans, even a relatively modest amount, paid early enough in the loan period, could offer huge savings in interest and duration of the loan.
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