Paying consistent additional payments toward your loan principal can yield singificant savings. You can do this using a few different techniques. For many people,Perhaps the simplest way to keep track is to make 1 extra payment every year. But many people will not be able to pull off such an enormous extra payment, so splitting one extra payment into 12 extra monthly payments works as well. Another popular option is to pay a half payment every two weeks. The effect here is that you will make one extra monthly payment each year. These options differ slightly 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 you will pay over the life of the loan.
Some borrowers just can't make extra payments. But you should remember that most mortgage contracts allow you to make additional payments at any time. Whenever you come into extra cash, consider using this provision to make an additional one-time payment toward your mortgage principal. If, for example, you were to receive a very large gift or tax refund four years into your mortgage, you could pay this money toward your loan principal, which would result in significant savings and a shorter payback period. For most loans, even a relatively modest amount, paid early enough in the loan period, could offer big savings in interest and in the length of the loan.
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