Extra Payments Provide Big Savings
Making consistent additional payments on your loan principal yields huge returns. You can pay against principal in many different ways. Paying one additional payment once per year is perhaps the easiest to arrange. Of course, many people will not be able to afford such a large extra payment, so splitting an additional payment into twelve additional monthly payments works too. Finally, you can commit to paying half of your mortgage payment every other week. These options differ slightly in lowering the final payback amount and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the duration of the loan.
One-time Additional Payment
It may not be possible for you to pay extra every month or even every year. Remember that virtually all mortgages will allow you to pay extra on your principal at any point during repayment. Any time you get some unexpected money, you can use this rule to pay a one-time additional payment on your mortgage principal. If, for example, you receive an unexpected windfall just a few years into your mortgage, investing several thousand dollars into your home's principal can significantly shorten the duration of your loan and save enormously on mortgage interest over the life of the mortgage loan. For most loans, even this modest amount, paid early in the mortgage, could offer huge savings in interest and length of the loan.