Making consistent additional payments on your loan principal can yield singificant returns. You can do this using a few different techniques. Paying a single additional payment once per year is probably the easiest to track. But many people will not be able to afford such a large extra payment, so dividing a single additional payment into 12 extra monthly payments is a fine option too. Finally, you can pay half of your mortgage payment every other week. Each of these options produces different results, but they will all significantly shorten the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. Keep in mind that most mortgage contracts will permit you to make additional payments to your principal at any point during repayment. Whenever you come into extra cash, consider using this rule to make a one-time additional payment on principal. Here's an example: five years after moving into your home, you get a very large tax refund,a large legacy, or a cash gift; , you could apply a portion of this windfall toward your loan principal, resulting in huge savings and a shorter payback period. Unless the loan is very large, even small amounts applied early can yield huge benefits over the 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.