Making consistent extra payments toward your principal balance yields singificant savings. People employ various techniques to accomplish this goal. For many people,Perhaps the easiest way to organize this process is to make 1 additional payment a year. However, many people will not be able to pull off this huge additional payment, so splitting one extra payment into twelve extra monthly payments works as well. Finally, you can pay a half payment every two weeks. These options differ slightly in reducing 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 extra every month or even every year. Keep in mind that most mortgage contracts will permit you to make additional payments to your principal at any time. You can benefit from this provision to pay down your mortgage principal when you come into extra money.
If, for example, you receive a very large gift or tax refund five years into your mortgage, investing several thousand dollars into your mortgage principal will significantly shorten the repayment duration of your loan and save a huge amount on mortgage interest over the life of the loan. Unless the mortgage loan is very large, even small amounts applied early can produce huge savings over the duration of the loan.
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