Extra Payments Yield Big Savings
Paying regular additional payments on the loan principal can yield singificant returns. People use different methods to meet this goal. Making one extra full payment one time a year may be the simplest to track. If you can't 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 half of your mortgage payment every other week. Each option produces slightly different results, but each will significantly reduce the length of your mortgage and lower your total interest paid.
One-time Additional Payment
Some people just can't make any extra payments. Keep in mind that virtually all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. You can take advantage of this provision to pay extra on your principal when you get some extra money. If, for example, you receive a large gift or tax refund four years into your mortgage, investing a few thousand dollars into your home's principal will shorten the duration of your loan and save a huge amount on mortgage interest 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.