Paying regular extra payments on your loan principal yields singificant savings. Borrowers can pay extra on principal by employing various techniques. Making a single additional payment one time a year is perhaps the simplest to keep track of. Of course, many people will not be able to swing such an enormous additional expense, so splitting a single extra payment into twelve extra monthly payments works too. Another very popular option is to pay half of your payment every two weeks. The result is you will make one additional monthly payment each year. These options differ a little in lowering the final payback amount and shortening payback length, but each will significantly reduce the duration of your mortgage and lower your total interest paid.
Some folks just can't make extra payments. But it's important to note that most mortgages will allow additional payments at any time. Any time you get some unexpected cash, you can use this rule to make an additional one-time payment toward your mortgage principal.
If, for example, you receive an unexpected windfall five years into your mortgage, you could apply this money toward your loan principal, which would result in enormous savings and a shortened payback period. For most loans, even a relatively small amount, paid early enough in the loan period, could offer big savings in interest and length of the loan.
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