Paying regular extra payments on your loan principal yields singificant returns. People use different methods to accomplish this goal. Making a single additional full payment once every year is likely the simplest to track. If you can't pay an extra whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Finally, you can commit to paying a half payment every other week. These options differ a little in lowering the final payback amount and shortening payback length, but each will significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. Keep in mind that most mortgage contracts will allow you to pay extra on your principal at any time. Any time you get some extra money, you can use this provision to pay an additional one-time payment on principal.
If, for example, you were to receive an unexpected windfall just a few years into your mortgage, investing a few thousand dollars into your home's principal can significantly shorten the repayment period of your loan and save a huge amount on mortgage interest over the duration of the mortgage loan. For most loans, even a small amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.