Paying consistent extra payments toward your principal yields huge returns. People use different methods to accomplish this goal. Paying 1 extra payment once a year is likely the easiest to keep track of. However, some people won't be able to afford this huge additional payment, so dividing one extra payment into twelve extra monthly payments is a fine option too. Another option is to pay half of your payment every two weeks. The effect here is that you make one additional monthly payment in a year. These options differ slightly in lowering the total interest paid and shortening payback length, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
It may not be possible for you to pay down your principal every month or even every year. Remember that most mortgages will permit you to pay extra on your principal at any point during repayment. You can take advantage of this provision 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, you could pay this money toward your loan principal, which would result in huge savings and a shortened loan period. Unless the loan is quite large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
Are you looking to buy a house? Let us help you. Just fill out as much of the information below that you want and we'll get right back to you, with no obligation to you. We guarantee your privacy.