Paying regular additional payments toward the loan principal can yield singificant savings. Borrowers can pay more on principal in many different ways. Making 1 additional full payment once every year may be the simplest to arrange. However, many folks will not be able to swing such a large additional payment, so dividing one additional payment into 12 additional monthly payments is a fine option too. Another popular option is to pay half of your payment every other week. The effect here is that you will make one additional monthly payment each year. Each of these options produces 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. Keep in mind that almost all mortgages will permit you to pay extra on your principal at any point during repayment. Whenever you come into extra cash, consider using this rule to make an additional one-time payment toward principal. If, for example, you were to receive a very large gift or tax refund three years into your mortgage, paying several thousand dollars into your mortgage principal can shorten the period of your loan and save a huge amount on mortgage interest over the duration of the loan. For most loans, even this relatively modest amount, paid early enough in the loan period, could offer big savings in interest and in the length of the loan.
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