Paying regular additional payments on the principal balance yields enormous returns. People accomplish this goal in several different ways. Making one additional payment one time per year may be the simplest to arrange. If you can't pay an additional whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another option is to pay a half payment every other week. The result is you will make one extra 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 duration of your mortgage and lower the total interest paid over the duration of the loan.
Lump Sum Extra Payment
It may not be possible for you to pay extra every month or even every year. Remember that most mortgage contracts will allow you to make additional payments to your principal at any point during repayment. You can take advantage of this provision to pay extra on your principal any time you get some extra money.
For example: five years after moving into your home, you receive a larger than expected tax refund,a large inheritance, or a cash gift; , you could apply this money toward your loan principal, which would result in significant savings and a shorter payback period. Unless the mortgage loan is quite large, even modest amounts applied early in the loan period can yield huge savings over the duration of the loan.
Wisdom Financial, Inc. can walk you Wisdom Financial, Inc. can answer questions about these interest savings and many others. Call us: 708.499.6088.