Making regular additional payments toward the principal balance yields enormous returns. People pay extra in several ways. Paying a single extra payment one time per year may be the simplest to track. Of course, some folks will not be able to afford such an enormous extra expense, so dividing an extra payment into twelve additional monthly payments is a great option too. Another popular option is to pay half of your payment every two weeks. The result is you will make one extra monthly payment in a year. These options differ a little in reducing the total interest paid and reducing payback length, but each will significantly reduce the duration of your mortgage and lower the total interest paid 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 additional principal payments at any time. You can take advantage of this provision to pay extra on your mortgage principal when you get some extra money. For example: a few years after moving into your home, you receive a larger than expected tax refund,a large legacy, or a cash gift; , investing several thousand dollars into your home's principal will significantly shorten the duration of your loan and save enormously on mortgage interest paid over the duration of the loan. For most loans, even a modest amount, paid early in the loan period, could offer huge savings in interest and duration of the loan.
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