Making consistent extra payments toward the loan principal will yield singificant returns. Borrowers pay extra in several different ways. For many people,Perhaps the easiest way to keep track is to make 1 additional payment every year. If you can't afford to pay an extra whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Finally, you can commit to paying a half payment every two weeks. Each option produces different results, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
Some people can't manage extra payments. But remember that most mortgages allow additional payments at any time. You can benefit from this rule to pay down your principal when you come into extra money.
If, for example, you were to receive a very large gift or tax refund five years into your mortgage, investing several thousand dollars into your home's principal will reduce the duration of your loan and save a huge amount on interest paid over the life of the loan. For most loans, even a small amount, paid early in the loan period, could offer big savings in interest and 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.