Paying consistent extra payments toward the principal balance yields singificant savings. You can pay extra on principal by employing various techniques. For many people,Perhaps the simplest way to keep track is to make 1 extra mortgage payment a year. Of course, many people will not be able to pull off this huge extra expense, so splitting one extra payment into 12 extra monthly payments works too. Finally, you can pay half of your mortgage payment every other week. These options differ a little in reducing the total interest paid and shortening payback length, but each will significantly shorten the duration of your mortgage and lower the total interest you will pay over the life of the loan.
Some folks can't manage extra payments. Remember that almost all mortgage contracts will allow you to pay extra on your principal at any time. Whenever you get some extra money, you can use this rule to make a one-time additional payment on mortgage principal.
For example: a few years after moving into your home, you get a larger than expected tax refund,a large legacy, or a non-taxable cash gift; , paying several thousand dollars into your mortgage principal can shorten the period of your loan and save a huge amount on interest paid over the life of the loan. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer huge savings in interest and in the duration of the loan.
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