Paying regular extra payments on your principal can yield singificant savings. You can accomplish this in several ways. Making a single extra full payment once a year may be the simplest to track. But many folks will not be able to swing such a large extra expense, so splitting an additional payment into twelve extra monthly payments is a great option too. Another very popular option is to pay a half payment every two weeks. The effect here is that you will make one extra monthly payment each year. These options differ slightly in reducing the final payback amount and shortening payback length, but each will significantly reduce the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. Remember that virtually all mortgage contracts will allow you to pay extra on your principal at any point during repayment. Any time you get some extra money, consider using this provision to make an additional one-time payment on your mortgage principal. Here's an example: five years after moving into your home, you receive a larger than expected 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 duration of your loan and save enormously on mortgage interest over the life of the loan. Unless the loan is very large, even modest amounts applied early in the loan period can yield huge benefits over the life of the loan.
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