Making consistent additional payments toward the principal provides singificant savings. Borrowers use different methods to meet this goal. Paying one extra full payment one time per year is probably the easiest to track. If you can't afford to pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another option is to pay half of your payment every other week. The effect here is that you will make one additional monthly payment every year. These options differ slightly in lowering the final payback amount and shortening payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. Any time you get some unexpected cash, you can use this provision to pay an additional one-time payment on your mortgage principal.
Here's an example: five years after moving into your home, you get a very large tax refund,a large legacy, or a non-taxable cash gift; , you could pay this windfall toward your mortgage loan principal, resulting in huge savings and a shortened payback period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can yield huge savings over the life 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.