Additional Payments Yield Big Mortgage Savings
Making regular additional payments toward your principal can yield singificant savings. Borrowers use different methods to accomplish this goal. For many people,Perhaps the easiest way to organize this process is by making one additional mortgage payment per year. But some folks will not be able to afford this huge extra payment, so splitting a single extra payment into 12 extra monthly payments is a fine option too. Finally, you can pay half of your mortgage payment every two weeks. These options differ a little in lowering the final payback amount and reducing payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
Lump Sum Extra Payment
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages will allow additional principal payments at any time. You can benefit from this provision to pay extra on your principal any time you come into extra money.
If, for example, you receive an unexpected windfall four years into your mortgage, paying several thousand dollars into your mortgage principal will reduce the period of your loan and save enormously on mortgage interest over the duration of the mortgage loan. For most loans, even a relatively modest amount, paid early in the loan period, could offer huge savings in interest and in the duration of the loan.
Ashok Lakshmanan can walk you through the pitfalls of getting a mortgage. Call us at 630-717-3600.