Paying regular additional payments toward your principal provides singificant savings. Borrowers use different methods to accomplish this goal. Paying 1 additional full payment once a year may be the simplest to arrange. However, many people will not be able to afford such an enormous extra payment, so dividing a single additional payment into twelve extra monthly payments works too. Another popular option is to pay a half payment every two weeks. The result is you will make one additional monthly payment in a year. Each of these options yields slightly different results, but each will significantly shorten the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. But it's important to note that most mortgages allow you to make additional payments at any time. You can benefit from this rule to pay extra on your principal any time you get some extra money. Here's an example: a few years after moving into your home, you get a huge tax refund,a very large legacy, or a non-taxable cash gift; , you could pay this money toward your mortgage loan principal, which would result in huge savings and a shorter payback period. For most loans, even this relatively small amount, paid early enough in the loan period, could offer big savings in interest and length of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.