Additional Payments Provide Big Savings
Making regular extra payments toward the loan principal will yield huge savings. Borrowers can accomplish this in various ways. Paying a single additional full payment one time a year is probably the simplest to keep track of. Of course, some folks won't be able to swing such an enormous extra payment, so dividing an additional payment into 12 additional monthly payments works as well. Finally, you can pay half of your mortgage payment every other week. Each of these options produces different results, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
Lump Sum Extra 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 additional payments at any time. Any time you come into unexpected money, you can use this provision to make a one-time additional payment toward principal.
If, for example, you were to receive a surprise windfall just a few years into your mortgage, paying several thousand dollars into your mortgage principal can significantly shorten the duration of your loan and save enormously on mortgage interest over the life of the loan. For most loans, even a modest amount, paid early enough 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 at 630-717-3600.