Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars in interest: Make extra payments that go to your loan principal. Borrowers can pay against principal in various ways. Paying a single additional full payment one time every year may be the easiest to arrange. But some people won't be able to pull off such a large extra expense, so splitting one additional payment into 12 extra monthly payments works too. Finally, you can commit to paying half of your mortgage payment every two weeks. Each option produces different results, but each will significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. But it's important to note that most mortgage contracts will allow you to make additional principal payments at any time. You can benefit from this provision to pay extra on your principal any time you get some extra money. For example: a few years after buying your home, you receive a very large tax refund,a large inheritance, or a non-taxable cash gift; , you could apply this windfall toward your loan principal, resulting in enormous savings and a shortened payback period. For most loans, even this relatively small amount, paid early enough in the loan period, could offer huge savings in interest and in the duration of the loan.
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