Here's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make extra payments that are applied toward your principal. Borrowers pay against principal by employing various techniques. Paying 1 additional full payment once every year may be the easiest to arrange. However, many folks won't be able to swing such a large extra payment, so dividing a single additional payment into twelve additional monthly payments is a fine option too. Another option is to pay a half payment every two weeks. The effect here is that you make one additional monthly payment every year. These options differ slightly in reducing the total interest paid and reducing payback length, but each will significantly shorten 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. Remember that most mortgages will allow you to make additional payments to your principal at any time. Any time you get some unexpected money, consider using this rule to pay a one-time additional payment toward your mortgage principal. If, for example, you receive an unexpected windfall just a few years into your mortgage, investing several thousand dollars into your mortgage principal will reduce the repayment duration of your loan and save a huge amount on mortgage interest paid over the duration of the loan. Unless the mortgage loan is very large, even modest amounts applied early can produce huge benefits over the duration of the loan.
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