Paying regular extra payments toward your loan principal can yield singificant savings. Borrowers pay extra on principal by employing various techniques. Paying 1 additional full payment once a year is likely the simplest to arrange. Of course, some folks will not be able to afford such an enormous extra expense, so dividing one additional payment into 12 extra monthly payments is a fine option too. Finally, you can commit to paying half of your mortgage payment every two weeks. Each option yields slightly different results, but they will all significantly shorten the length of your mortgage and lower your total interest paid.
Some people can't manage extra payments. Remember that almost all mortgage contracts will permit you to make additional payments to your principal at any point during repayment. Whenever you get some extra cash, consider using this provision to make an additional one-time payment toward principal. Here's an example: five years after buying your home, you receive a very large tax refund,a large legacy, or a non-taxable cash gift; , paying a few thousand dollars into your home's principal will reduce the repayment duration of your loan and save a huge amount on mortgage interest paid over the duration of the loan. Unless the mortgage loan is very large, even a few thousand dollars applied early can yield huge savings over the duration of the loan.
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