Extra Payments Yield Big Savings
There's a trick to reduce the repayment period of your mortgage and save you thousands in interest: Make additional payments which apply to your principal. Borrowers can do this in several ways. For many people,Perhaps the easiest way to organize this process is to make one extra mortgage payment every year. If you can't pay an extra whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every two weeks. Each option produces different results, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
Additional One-time payment
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgage contracts allow you to make 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.
If, for example, you were to receive a surprise windfall five years into your mortgage, investing a few thousand dollars into your home's principal will reduce the period of your loan and save enormously on interest paid over the life of the loan. For most loans, even a modest amount, paid early enough in the loan period, could offer big savings in interest and length of the loan.
Ashok Lakshmanan can walk you At Ashok Lakshmanan, we answer questions about interest-saving strategies every day. Give us a call: 630-717-3600.