Making regular additional payments on the loan principal yields enormous savings. Borrowers pay extra on principal by employing various techniques. Paying 1 additional full payment one time per year is probably the easiest to track. However, many people won't be able to afford such a large extra payment, so splitting a single additional payment into twelve additional monthly payments is a great option too. Another very popular option is to pay a half payment every other week. The effect here is that you will make one additional monthly payment each year. These options differ a little in lowering the total interest paid and reducing payback length, but they will all 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 more every month or even every year. Remember that almost all mortgage contracts will permit you to make additional payments to your principal at any time. You can benefit from this provision to pay down your mortgage principal any time you get some extra money.
Here's an example: several years after moving into your home, you get a huge tax refund,a large legacy, or a cash gift; , you could apply this money toward your loan principal, resulting in huge savings and a shortened payback period. For most loans, even this relatively modest amount, paid early in the mortgage, could offer huge savings in interest and in the length of the loan.
MidTowne Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 4787462063.