Paying regular extra payments toward your loan principal can yield huge returns. Borrowers pay extra on principal in various ways. For many people,Perhaps the simplest way to keep track is by making 1 additional payment a year. If you can't pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and write a check for 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 reducing payback length, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.
Some folks just can't make any extra payments. Remember that most mortgage contracts will permit you to pay extra on your principal at any time. You can benefit from this provision to pay extra on your principal any time you come into extra money.
If, for example, you were to receive a large gift or tax refund five years into your mortgage, you could pay this windfall toward your mortgage loan principal, which would result in significant savings and a shorter payback period. For most loans, even a small amount, paid early enough in the loan period, could offer big savings in interest and length of the loan.
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