Paying consistent additional payments toward your principal balance can yield singificant returns. Borrowers pay against principal by employing various techniques. Making 1 extra payment once every year is likely the simplest to arrange. However, many folks will not be able to pull off such an enormous extra expense, so splitting a single extra payment into twelve additional monthly payments is a great option too. Another popular 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 total interest paid and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
Some people just can't make any extra payments. But remember that most mortgages will allow you to make additional principal payments at any time. Any time you come into unexpected cash, you can use this rule to make a one-time additional payment toward your mortgage principal. If, for example, you were to receive an unexpected windfall five years into your mortgage, investing several thousand dollars into your mortgage principal will significantly shorten the duration of your loan and save enormously on mortgage interest over the life of the loan. Unless the loan is quite large, even small amounts applied early can produce huge savings over the duration of the loan.
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