Paying regular additional payments toward your loan principal can yield big savings. Borrowers employ various techniques to meet this goal. Making 1 additional payment one time every year may be the simplest to arrange. But many people won't be able to pull off this huge additional payment, so splitting an extra payment into 12 additional monthly payments is a fine option too. Another popular option is to pay half of your payment every two weeks. The result is you make one extra monthly payment every year. These options differ slightly in lowering the total interest paid and shortening payback length, but each will significantly reduce the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages allow you to make additional principal payments at any time. You can take advantage of this rule to pay down your mortgage principal when you get some extra money.
For example: five years after buying your home, you get a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , you could pay a portion of this windfall toward your loan principal, resulting in huge savings and a shortened payback period. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer huge savings in interest and in the length of the loan.
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