Extra Payments Yield Huge Mortgage Savings
Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make additional payments that go toward the principal. People employ various techniques to accomplish this goal. Making 1 additional full payment one time per year is likely the simplest to keep track of. If you can't afford to pay an extra whole payment in one month, you can divide that payment by 12 and write a check for that additional amount monthly. Finally, you can pay a half payment every other week. These options differ a little in lowering the final payback amount and reducing payback length, but they will all significantly shorten the duration of your mortgage and lower the total interest you will pay over the life of the loan.
Lump Sum Extra Payment
Some folks can't manage extra payments. Keep in mind that most mortgage contracts will allow you to pay extra on your principal at any time. Any time you come into unexpected cash, you can use this provision to make a one-time additional payment on your principal.
Here's an example: a few years after buying your home, you receive a larger than expected tax refund,a large legacy, or a cash gift; , paying a few thousand dollars into your mortgage principal will shorten the repayment period of your loan and save enormously on interest paid over the life of the loan. Unless the loan is quite large, even modest amounts applied early in the loan period can produce huge benefits over the duration of the loan.