Paying consistent additional payments toward the loan principal provides singificant savings. Borrowers can pay extra on principal by employing various techniques. Making one additional full payment one time a year is likely the easiest to track. Of course, many people won't be able to pull off this huge additional payment, so dividing a single extra payment into twelve additional monthly payments works as well. Another very popular option is to pay a half payment every other week. The effect here is that you make one additional monthly payment every year. These options differ a little in lowering the final payback amount and shortening payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
Some borrowers can't manage any extra payments. Remember that most mortgage contracts will allow you to pay extra on your principal at any time. Whenever you come into unexpected cash, you can use this rule to pay an additional one-time payment toward mortgage principal. If, for example, you were to receive a very large gift or tax refund just a few years into your mortgage, investing a few thousand dollars into your home's principal can shorten the period of your loan and save a huge amount on interest paid over the life of the loan. For most loans, even this relatively modest amount, paid early enough in the loan period, could offer big savings in interest and in the duration of the loan.
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