Extra Payments Provide Big Mortgage Savings
Making consistent additional payments toward the loan principal can yield singificant returns. Borrowers use different methods to meet this goal. For many people,Perhaps the easiest way to keep track is to make 1 extra payment a year. If you can't afford to pay an extra whole payment in one month, you can divide that payment by 12 and pay that additional amount monthly. Another popular option is to pay a half payment every other week. The effect here is that you make one additional monthly payment every year. These options differ slightly in reducing the final payback amount and reducing payback length, but each will significantly reduce the length of your mortgage and lower the total interest paid over the life of the loan.
Additional One-time payment
Some people can't manage any extra payments. Remember that virtually all mortgages will permit you to make additional payments to your principal at any point during repayment. You can benefit from this rule to pay extra on your mortgage principal when you come into extra money.
Here's an example: five years after moving into your home, you receive a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , investing a few thousand dollars into your home's principal can shorten the period of your loan and save enormously on interest over the life of the loan. For most loans, even a relatively small amount, paid early in the mortgage, could offer big savings in interest and in the length of the loan.
Ashok Lakshmanan can walk you the mortgage process. Call us: 630-717-3600.