Paying consistent extra payments on your loan principal yields singificant returns. Borrowers pay extra in a few different ways. For many people,Perhaps the simplest way to keep track is to make one extra payment every year. If you can't pay an extra whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Finally, you can pay half of your mortgage payment every other week. These options differ a little in lowering the final payback amount and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay extra every month or even every year. But remember that most mortgages will allow you to make additional principal payments at any time. Whenever you get some extra money, you can use this provision to pay a one-time additional payment toward your principal.
If, for example, you receive a large gift or tax refund five years into your mortgage, investing several thousand dollars into your home's principal will significantly shorten the duration of your loan and save a huge amount on interest over the life of the mortgage loan. For most loans, even this modest amount, paid early in the mortgage, could offer huge savings in interest and in the duration of the loan.
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