Here's a simple trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments that apply toward the principal. Borrowers pay extra in several ways. Paying one extra payment once a year is probably the easiest to keep track of. Of course, some folks won't be able to afford such an enormous additional payment, so splitting one additional payment into 12 extra monthly payments works as well. Another option is to pay a half payment every two weeks. The result is you make one additional monthly payment each year. Each option yields different results, but they will all significantly shorten the duration of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages allow you to make additional payments at any time. You can take advantage of this rule to pay down your principal when you come into extra money. Here's an example: several years after buying your home, you receive a very large tax refund,a very large inheritance, or a non-taxable cash gift; , paying a few thousand dollars into your home's principal will significantly reduce the repayment duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. For most loans, even a 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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