Paying regular additional payments toward the principal provides enormous returns. You can pay more on principal by employing various techniques. Making one additional full payment once a year is perhaps the simplest to track. Of course, many folks will not be able to pull off such a large extra payment, so splitting a single extra payment into twelve extra monthly payments is a great option too. Another popular option is to pay a half payment every two weeks. The result is you make one additional monthly payment in a year. Each option produces slightly different results, but they will all significantly reduce the duration 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 almost all mortgage contracts will allow you to make additional payments to your principal at any point during repayment. You can benefit from this provision to pay extra on your mortgage principal any time you come into extra money.
Here's an example: a few years after moving into your home, you get a very large tax refund,a large legacy, or a non-taxable cash gift; , investing several thousand dollars into your home's principal can significantly reduce the repayment duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. Unless the loan is very large, even a few thousand dollars applied early in the loan period can yield huge savings over the duration of the loan.
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