Big Interest Savings: Available to Anyone

Making consistent additional payments toward the loan principal will yield singificant returns. Borrowers pay extra in several different ways. Paying one extra full payment one time per year is likely the simplest to track. But some people can't swing such an enormous additional expense, so dividing one extra payment into 12 additional monthly payments is a fine option too. Another popular option is to pay a half payment every other week. The effect here is that you make one extra monthly payment in a year. These options differ a little in lowering the total interest paid and shortening payback length, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.

One-time Additional Payment

Some folks just can't make extra payments. Remember that virtually all mortgages will allow you to make additional payments to your principal at any time. Any time you get some unexpected money, you can use this rule to make a one-time additional payment on your mortgage principal. If, for example, you receive an unexpected windfall four years into your mortgage, paying several thousand dollars into your mortgage principal will shorten the duration of your loan and save enormously on mortgage interest paid over the life of the loan. Unless the mortgage loan is very large, even a few thousand dollars applied early in the loan period can produce huge benefits over the duration of the loan.

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