Making consistent extra payments toward your principal balance will yield enormous savings. Borrowers pay against principal in various ways. Making a single additional full payment once per year is perhaps the easiest to track. However, some folks won't be able to afford such a large extra payment, so dividing an extra payment into 12 extra monthly payments is a great option too. Another popular option is to pay half of your payment every other week. The effect here is that you will make one extra monthly payment in a year. Each of these options produces slightly different results, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the duration of the loan.
Some borrowers just can't make any extra payments. Keep in mind that almost all mortgage contracts will allow you to make additional payments to your principal at any time. You can benefit from this provision to pay extra on your principal when you get some extra money. If, for example, you were to receive a surprise windfall three years into your mortgage, investing several thousand dollars into your mortgage principal will significantly shorten the period of your loan and save a huge amount on interest paid over the life of the loan. Unless the mortgage loan is very large, even a few thousand dollars applied early in the loan period can produce huge benefits over the 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.