Paying regular extra payments toward your loan principal provides singificant returns. Borrowers can accomplish this in various ways. Making one extra full payment one time per year may be the easiest to arrange. If you can't afford to pay an additional whole payment all at once, you can divide that payment by 12 and write a check for that additional amount monthly. Another option is to pay half of your payment every other week. The result is you will make one additional monthly payment each year. These options differ a little in lowering the final payback amount and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.
Some folks just can't make extra payments. But it's important to note that most mortgages allow you to make additional principal payments at any time. You can benefit from this rule to pay down your principal when you come into extra money.
If, for example, you were to receive a very large gift or tax refund three years into your mortgage, investing a few thousand dollars into your mortgage principal can shorten the period of your loan and save a huge amount on interest over the life of the loan. For most loans, even a relatively small amount, paid early in the loan period, could offer huge savings in interest and length of the loan.
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