Big Savings on Interest: Available to Anyone with a Mortgage

Here's a simple trick to significantly reduce the length of your mortgage and save you thousands in interest: Make additional payments that go to the loan principal. You pay against principal in various ways. Paying 1 extra payment once every year is probably the simplest to track. But many folks can't afford such a large additional expense, so dividing a single extra payment into twelve extra monthly payments works as well. Another popular option is to pay half of your payment every other week. The result is you make one extra monthly payment every year. These options differ a little in reducing the final payback amount and reducing payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.

Lump Sum Extra Payment

Some borrowers just can't make extra payments. But it's important to note that most mortgages allow additional payments at any time. You can take advantage of this rule to pay extra on your mortgage principal any time you come into extra money. For example: a few years after buying your home, you receive a very large tax refund,a very large legacy, or a cash gift; , you could apply this windfall toward your loan principal, resulting in enormous savings and a shortened payback period. Unless the loan is quite large, even a few thousand dollars applied early can produce huge benefits over the life of the loan.

Ashok Lakshmanan can walk you Ashok Lakshmanan has your mortgage answers. Give us a call: 630-717-3600.