Paying regular extra payments on your loan principal yields huge returns. You can do this using a few different techniques. For many people,Perhaps the easiest way to keep track is to make one additional mortgage payment every year. If you can't afford to pay an additional whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Another option is to pay a half payment every two weeks. The effect here is that you make one extra monthly payment every year. These options differ slightly in lowering the total interest paid and reducing payback length, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay more every month or even every year. But you should remember that most mortgage contracts allow additional payments at any time. Whenever you come into unexpected cash, you can use this rule to make an additional one-time payment on mortgage principal. If, for example, you receive a surprise windfall five years into your mortgage, investing a few thousand dollars into your mortgage principal can reduce the period of your loan and save enormously on interest paid over the life of the loan. Unless the mortgage loan is quite large, even a few thousand dollars applied early can yield huge savings over the life 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.