Additional Payments Provide Huge Mortgage Savings
Making regular additional payments on your principal will provide enormous savings. Borrowers use different methods to meet this goal. Making 1 extra full payment one time per year is probably the easiest to keep track of. But some people won't be able to swing this huge additional expense, so dividing a single additional payment into twelve additional monthly payments is a fine option too. Finally, you can pay half of your mortgage payment every two weeks. These options differ slightly in lowering the final payback amount and shortening payback length, but they will all significantly reduce the length of your mortgage and lower the total interest paid over the duration of the loan.
Lump-sum Additional Payment
Some borrowers can't manage any extra payments. Keep in mind that almost all mortgage contracts will allow you to pay extra on your principal at any point during repayment. You can take advantage of this rule to pay down your principal when you come into extra money.
Here's an example: a few years after buying your home, you receive a huge tax refund,a very large legacy, or a non-taxable cash gift; , paying a few thousand dollars into your mortgage principal will significantly shorten the duration of your loan and save a huge amount on mortgage interest paid over the duration of the loan. For most loans, even this relatively modest amount, paid early enough in the loan period, could offer big savings in interest and in the duration of the loan.