Making regular extra payments on the loan principal provides singificant returns. Borrowers can do this in several ways. Paying one additional payment one time per year may be the easiest to arrange. If you can't afford to pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every other week. Each option yields different results, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. Remember that almost all mortgage contracts will permit you to make additional payments to your principal at any point during repayment. Whenever you come into unexpected cash, consider using this provision to pay an additional one-time payment on your principal.
Here's an example: several years after moving into your home, you receive a huge tax refund,a very large legacy, or a non-taxable cash gift; , paying a few thousand dollars into your mortgage principal can significantly reduce the repayment duration of your loan and save a huge amount on interest over the duration of the loan. For most loans, even a relatively modest amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
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