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There's a trick to reduce the repayment period of your mortgage and save thousands in interest: Make additional payments that apply to your loan principal. Borrowers pay extra in several different ways. Making 1 extra payment once per year is perhaps the easiest to keep track of. If you can't afford to pay an additional whole payment in one month, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another very popular option is to pay half of your payment every other week. The effect here is that you make one extra monthly payment in a year. Each option produces different results, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
One-time Additional Payment
Some borrowers just can't make any extra payments. Remember that almost all mortgages will allow you to make additional payments to your principal at any time. You can benefit from this provision to pay extra on your principal any time you come into extra money. If, for example, you were to receive a very large gift or tax refund five years into your mortgage, you could pay this windfall toward your mortgage loan principal, which would result in huge savings and a shortened loan period. For most loans, even a relatively small amount, paid early enough in the mortgage, could offer big savings in interest and length of the loan.
At Real Estate Loan 4 U, we answer questions about money-saving strategies almost every day. Give us a call at (408) 255-3978.