Extra Payments Provide Big Savings
Here's a simple trick to reduce the repayment period of your mortgage and save you thousands of dollars over the course of your loan: Make additional payments that go to your principal. You pay extra on principal by employing various techniques. Paying one extra payment one time per year is likely the simplest to arrange. If you can't pay an additional whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Finally, you can commit to paying half of your mortgage payment every other week. These options differ a little in lowering the final payback amount and reducing payback length, but each will significantly reduce the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Additional One-time payment
Some people can't manage extra payments. Remember that most mortgages will permit you to make additional payments to your principal at any time. You can take advantage of this provision to pay down your principal any time you get some extra money.
If, for example, you receive an unexpected windfall four years into your mortgage, you could apply a portion of this windfall toward your loan principal, which would result in significant savings and a shorter loan period. Unless the loan is very large, even modest amounts applied early in the loan period can produce huge savings over the life of the loan.
Ashok Lakshmanan can walk you At Ashok Lakshmanan, we answer questions about interest-saving strategies every day. Call us: 630-717-3600.