Here's a simple trick to significantly reduce the length of your mortgage and save thousands over the course of your loan: Make extra payments that apply to your loan principal. People employ various techniques to meet this goal. For many people,Perhaps the easiest way to organize this process is to make 1 extra payment per year. But some people will not be able to afford this huge additional payment, so splitting a single additional payment into twelve extra monthly payments works too. Another very popular option is to pay half of your payment every two weeks. The result is you make one additional monthly payment every year. Each of these options produces slightly different results, but they will all significantly reduce 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 allow additional payments at any time. Whenever you get some extra money, you can use this provision to pay a one-time additional payment on your principal. If, for example, you were to receive a large gift or tax refund five years into your mortgage, you could apply a portion of this windfall toward your mortgage loan principal, resulting in enormous savings and a shortened loan period. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer huge savings in interest and in the length of the loan.
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