Making consistent extra payments on the loan principal yields singificant savings. Borrowers pay extra in a few different ways. Making a single extra payment once a year is perhaps the easiest to keep track of. But some people won't be able to pull off such a large additional expense, so dividing one extra payment into 12 additional monthly payments works too. Finally, you can pay a half payment every two weeks. Each of these options produces slightly different results, but they will all significantly shorten the duration of your mortgage and lower the total interest you will pay over the duration of the loan.
Some folks just can't make any extra payments. Remember that virtually all mortgages will allow you to pay extra on your principal at any time. You can take advantage of this rule to pay extra on your principal when you come into extra money.
If, for example, you receive a very large gift or tax refund three years into your mortgage, paying a few thousand dollars into your mortgage principal will shorten the repayment period of your loan and save enormously on interest over the life of the mortgage loan. Unless the mortgage loan is very large, even a few thousand dollars applied early in the loan period can produce huge savings over the life of the loan.
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