Making regular extra payments on the principal can yield huge savings. You can accomplish this using a few different techniques. Paying a single extra payment once a year is likely the simplest to arrange. However, some folks won't be able to pull off such a large additional payment, so dividing one extra payment into twelve additional monthly payments is a fine option too. Finally, you can pay half of your mortgage payment every two weeks. These options differ a little in reducing the final payback amount and shortening payback length, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the duration of the loan.
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgage contracts will allow you to make additional principal payments at any time. Whenever you come into unexpected money, consider using this rule to pay an additional one-time payment on your mortgage principal.
For example: five years after moving into your home, you receive a huge tax refund,a very large inheritance, or a cash gift; , you could apply this money toward your loan principal, resulting in enormous savings and a shortened payback period. Unless the loan is quite large, even a few thousand dollars applied early in the loan period can yield huge savings over the life of the loan.
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