Making consistent additional payments toward the loan principal yields big returns. Borrowers employ various techniques to accomplish this goal. Paying 1 additional full payment one time a year is perhaps the easiest to keep track of. If you can't pay an extra 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 popular option is to pay a half payment every two weeks. The result is you make one additional monthly payment in a year. Each option produces different results, but they will all significantly shorten the duration of your mortgage and lower your total interest paid.
Some people can't manage extra payments. Remember that most mortgages will permit you to make additional payments to your principal at any point during repayment. Whenever you get some extra money, consider using this rule to pay a one-time additional payment on your mortgage principal.
Here's an example: five years after buying your home, you receive a larger than expected tax refund,a very large inheritance, or a cash gift; , investing several thousand dollars into your home's principal can significantly reduce the period of your loan and save enormously on interest paid over the life of the loan. Unless the loan is very large, even small amounts applied early in the loan period can produce huge savings over the duration 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.