Extra Payments Yield Big Mortgage Savings

There's a trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make additional payments which apply to the loan principal. People accomplish this goal in a few ways. Making 1 additional full payment one time per year may be the easiest to track. If you can't pay an extra whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Finally, you can pay a half payment every two weeks. These options differ slightly in lowering the final payback amount and reducing 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 Additional Payment

Some people just can't make any extra payments. But you should remember that most mortgages will allow additional principal payments at any time. Any time you get some unexpected cash, consider using this provision to pay a one-time additional payment on your principal.

If, for example, you were to receive a very large gift or tax refund four years into your mortgage, investing a few thousand dollars into your mortgage principal can reduce the repayment duration of your loan and save enormously on interest paid over the duration of the loan. For most loans, even this modest amount, paid early enough in the mortgage, could offer big savings in interest and in the length of the loan.

Statewide Funding can walk you through the pitfalls of getting a mortgage. Call us: (415) 456-7802.

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