Extra Payments Provide Big Mortgage Savings
Making consistent extra payments on your principal will yield significant returns. You can do this using a few different techniques. Making a single additional full payment once a year is likely the simplest to track. However, some people won’t be able to pull off such an enormous additional expense, so splitting one extra payment into 12 extra monthly payments is a fine option too. Finally, you can pay half of your mortgage payment every two weeks. Each of these options produces slightly different results, but each will significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
Additional One-time payment
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that virtually all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. Whenever you get some extra cash, consider using this rule to pay an additional one-time payment toward your principal.
Here’s an example: a few years after buying your home, you receive a very large tax refund,a large legacy, or a cash gift; , investing several thousand dollars into your home’s principal will reduce the period of your loan and save enormously on interest paid over the duration of the mortgage loan. For most loans, even a relatively small amount, paid early enough in the mortgage, could offer big savings in interest and length of the loan.