Extra Payments Yield Huge Savings
Here's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make additional payments that go toward your loan principal. Borrowers can do this in several ways. For many people,Perhaps the easiest way to keep track is to make 1 additional mortgage payment per year. Of course, many people will not be able to afford this huge extra expense, so splitting an extra payment into 12 additional monthly payments is a great option too. Finally, you can pay a half payment every two weeks. Each of these options produces different results, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
One-time Additional Payment
It may not be possible for you to pay extra every month or even every year. But it's important to note that most mortgages allow you to make additional payments at any time. You can benefit from this provision to pay extra on your mortgage principal when you get some extra money.
If, for example, you receive a very large gift or tax refund four years into your mortgage, you could apply a portion of this money toward your mortgage loan principal, which would result in significant savings and a shortened payback period. For most loans, even a modest amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
Ashok Lakshmanan can walk you Ashok Lakshmanan can answer questions about these interest savings and many others. Give us a call at 630-717-3600.