Making consistent extra payments toward the principal balance provides big returns. Borrowers can accomplish this in several ways. For many people,Perhaps the easiest way to organize this process is by making one additional mortgage payment a year. If you can't afford to pay an additional whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Another option is to pay half of your payment every other week. The result is you make one extra monthly payment every year. These options differ a little in reducing the final payback amount and shortening payback length, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
Some people can't manage any extra payments. Remember that virtually all mortgages will permit you to pay extra on your principal at any time. Whenever you get some unexpected money, consider using this provision to make an additional one-time payment on your mortgage principal.
If, for example, you were to receive a large gift or tax refund four years into your mortgage, you could apply this money toward your loan principal, which would result in significant savings and a shortened payback period. Unless the loan is quite large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
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