Extra Payments Yield Huge Savings
Making regular additional payments on your principal can yield enormous savings. Borrowers pay extra in several ways. Paying 1 extra payment one time every year may be the easiest to keep track of. However, many folks can't 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 a half payment every two weeks. The result is you will make one additional monthly payment each year. These options differ slightly in lowering the total interest paid and shortening payback length, but they will all significantly shorten the length of your mortgage and lower the total interest you will pay over the life of the loan.
Lump-sum Additional Payment
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages will allow you to make additional principal payments at any time. You can benefit from this rule to pay extra on your principal when you get some extra money. For example: five years after buying your home, you get a larger than expected tax refund,a very large legacy, or a non-taxable cash gift; , you could apply a portion of this money toward your mortgage loan principal, which would result in significant savings and a shorter payback period. Unless the loan is quite large, even small amounts applied early in the loan period can yield huge benefits over the life of the loan.
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