Making regular extra payments toward your principal provides huge returns. Borrowers can do this in several ways. For many people,Perhaps the simplest way to organize this process is to make 1 additional mortgage payment per year. However, some people won't be able to pull off such a large extra expense, so splitting one additional payment into 12 additional monthly payments is a fine option too. Finally, you can pay a half payment every other week. These options differ a little 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.
Some people just can't make extra payments. But it's important to note that most mortgage contracts allow additional payments at any time. You can benefit from this rule to pay down your principal any time you come into extra money.
If, for example, you receive a large gift or tax refund three years into your mortgage, you could pay a portion of this windfall toward your loan principal, resulting in enormous savings and a shorter loan period. Unless the loan is quite 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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