Making consistent additional payments toward the loan principal yields singificant savings. Borrowers employ various techniques to accomplish this goal. For many people,Perhaps the simplest way to organize this process is to make one additional mortgage payment a year. But some people can't pull off such an enormous extra payment, so splitting a single additional payment into 12 additional monthly payments works too. Another very popular option is to pay a half payment every other week. The effect here is that you make one additional monthly payment each year. These options differ a little in lowering the total interest paid and reducing payback length, but they will all significantly shorten the length of your mortgage and lower your total interest paid.
Some people just can't make any extra payments. But remember that most mortgages allow additional principal payments at any time. You can take advantage of this rule to pay down your mortgage principal any time you come into extra money.
Here's an example: five years after moving into your home, you get a very large tax refund,a very large inheritance, or a non-taxable cash gift; , paying a few thousand dollars into your mortgage principal will significantly shorten the repayment period of your loan and save enormously on mortgage interest over the life of the mortgage loan. For most loans, even a small amount, paid early in the mortgage, could offer big savings in interest and in the length of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.