Making regular additional payments toward the loan principal can yield enormous savings. Borrowers can accomplish this in several ways. For many people, perhaps the simplest way to organize this process is by making 1 additional payment per year. However, many folks will not be able to swing this huge additional expense, so dividing a single extra payment into twelve additional monthly payments is a great option too. Finally, you can commit to paying a half payment every other week. These options differ slightly in reducing the final payback amount and reducing payback length, but they will all significantly reduce the length of your mortgage and lower your total interest paid.
One-time Additional Payment
Some folks can’t manage extra payments. Keep in mind that most mortgages will permit you to make additional payments to your principal at any time. Any time you come into extra cash, consider using this rule to make a one-time additional payment toward your mortgage principal.
If, for example, you were to receive an unexpected windfall five years into your mortgage, investing a few thousand dollars into your mortgage principal will significantly shorten the repayment duration of your loan and save enormously on interest over the life of the mortgage loan. For most loans, even a relatively modest amount, paid early enough in the loan period, could offer huge savings in interest and duration of the loan.