Extra Payments Yield Big Savings

Paying consistent additional payments on the principal yields huge returns. Borrowers use different methods to accomplish this goal. Paying 1 extra full payment one time per year is perhaps the simplest to track. If you can't afford to pay an additional whole payment in one month, you can divide your payment by 12 and pay that additional amount monthly. Another option is to pay a half payment every two weeks. The result is you will make one extra monthly payment each year. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.

Lump Sum Extra Payment

Some borrowers can't manage any extra payments. Keep in mind that virtually all mortgages will allow you to make additional payments to your principal at any time. You can take advantage of this rule to pay extra on your principal any time you get some extra money.

If, for example, you receive an unexpected windfall three years into your mortgage, investing a few thousand dollars into your home's principal will shorten the period of your loan and save a huge amount on interest paid over the duration of the mortgage loan. Unless the mortgage loan is quite large, even a few thousand dollars applied early can yield huge savings over the life of the loan.

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