Paying regular additional payments on the principal will yield enormous returns. Borrowers accomplish this goal in a few ways. Paying 1 additional full payment one time every year is likely the simplest to keep track of. However, some people will not be able to afford such an enormous additional expense, so dividing an extra payment into twelve additional monthly payments works as well. Finally, you can commit to paying half of your mortgage payment every other week. These options differ a little in reducing the final payback amount and reducing payback length, but they will all significantly reduce the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Some borrowers just can't make extra payments. Keep in mind that virtually all mortgages will permit you to pay extra on your principal at any time. You can take advantage of this rule to pay extra on your principal when you come into extra money. If, for example, you were to receive a surprise windfall four years into your mortgage, you could apply this money toward your loan principal, resulting in enormous savings and a shortened payback period. Unless the loan is very large, even a few thousand dollars applied early can yield huge savings over the life of the loan.
Are you looking to buy a house? Let us help you. Just fill out as much of the information below that you want and we'll get right back to you, with no obligation to you. We guarantee your privacy.