Big Savings on Interest: Available to Anyone
Here's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments that are applied to the principal. People accomplish this goal in several ways. Paying a single extra full payment once every year is perhaps the simplest to keep track of. If you can't pay an additional whole payment in one month, you can divide your payment by 12 and write a check for that additional amount monthly. Another option is to pay half of your payment every other week. The result is you make one extra monthly payment in a year. Each of these options yields slightly different results, but they will all significantly shorten the duration of your mortgage and lower the total interest paid over the duration of the loan.
One-time Additional Payment
Some borrowers can't manage any extra payments. Remember that most mortgages will allow you to make additional payments to your principal at any point during repayment. Any time you get some extra money, consider using this provision to pay a one-time additional payment on your mortgage principal. Here's an example: several years after buying your home, you receive a very large tax refund,a large inheritance, or a non-taxable cash gift; , you could apply this windfall toward your loan principal, which would result in enormous savings and a shortened payback period. Unless the loan is very large, even small amounts applied early in the loan period can yield huge savings over the life of the loan.