Paying consistent additional payments on your loan principal provides huge returns. People pay extra in a few ways. For many people,Perhaps the simplest way to organize this process is by making 1 additional payment every year. Of course, many people will not be able to swing this huge additional payment, so dividing one extra payment into 12 additional monthly payments works too. Finally, you can pay a half payment every two weeks. Each of these options yields slightly different results, but they will all significantly shorten the duration of your mortgage and lower your total interest paid.
Some borrowers just can't make extra payments. Keep in mind that most mortgages will permit you to pay extra on your principal at any time. Whenever you come into unexpected money, you can use this rule to make an additional one-time payment toward your mortgage principal. If, for example, you receive a very large gift or tax refund just a few years into your mortgage, paying several thousand dollars into your home's principal can reduce the repayment period of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. Unless the mortgage loan is very large, even small amounts applied early in the loan period can yield huge savings over the duration of the loan.
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