Mortgage Savings Tips
Paying consistent additional payments toward your principal balance will yield enormous returns. You can do this using a few different techniques. For many people, perhaps the easiest way to keep track is by making one extra mortgage payment per year. But many folks will not be able to pull off such a large additional expense, so dividing one extra payment into 12 additional monthly payments works too. Another popular option is to pay a half payment every other week. The result is you will make one additional monthly payment each year. Each of these options yields slightly different results, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
One-time Additional Payment
It may not be possible for you to pay more every month or even every year. Keep in mind that most mortgage contracts will allow you to pay extra on your principal at any point during repayment. Any time you get some extra cash, you can use this provision to pay a one-time additional payment toward principal. For example, a few years after moving into your home you receive a larger than expected tax refund, a large inheritance, or a non-taxable cash gift. You could apply this money toward your mortgage loan principal which would result in significant savings and a shortened loan period. For most loans, even this relatively small amount paid early in the loan period could offer huge savings in interest and in the duration of the loan.
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