Making consistent extra payments on your principal will yield big returns. Borrowers employ various techniques to meet this goal. Making a single extra payment one time a year may be the easiest to track. If you can't afford to 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 additional monthly payment in a year. These options differ slightly in lowering the total interest paid and reducing payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
Some folks just can't make extra payments. Remember that virtually all mortgages will allow you to pay extra on your principal at any point during repayment. You can benefit from this provision to pay extra on your principal any time you come into extra money.
Here's an example: a few years after buying your home, you get a larger than expected tax refund,a large legacy, or a cash gift; , investing several thousand dollars into your home's principal can significantly reduce the duration of your loan and save enormously on interest paid over the life of the loan. For most loans, even this relatively small amount, paid early enough in the mortgage, could offer big savings in interest and duration of the loan.
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