Additional Payments Provide Big Savings
Here's a simple trick to significantly reduce the length of your mortgage and save you thousands over the course of your loan: Make additional payments which go to your principal. Borrowers can pay extra on principal in various ways. For many people,Perhaps the easiest way to organize this process is to make one extra mortgage payment a year. If you can't afford to pay an additional whole payment in one month, you can divide your payment by 12 and pay that additional amount monthly. Finally, you can commit to paying a half payment every other week. Each option yields different results, 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 Extra Payment
Some borrowers just can't make any extra payments. But remember that most mortgage contracts will allow additional payments at any time. You can take advantage of this rule to pay down your principal when you come into extra money.
For example: a few years after buying your home, you receive a larger than expected tax refund,a large inheritance, or a non-taxable cash gift; , you could pay this windfall toward your loan principal, which would result in enormous savings and a shortened payback period. For most loans, even this small amount, paid early in the loan period, could offer big savings in interest and in the duration of the loan.
Ashok Lakshmanan can walk you At Ashok Lakshmanan, we answer questions about interest-saving strategies almost every day. Give us a call: 630-717-3600.