Save Big on your Mortgage

Making regular extra payments toward your loan principal can yield big returns. Borrowers use different methods to accomplish this goal. Making one additional full payment once per year is likely the easiest to track. If you can't afford to pay an additional whole payment all at once, you can divide your payment by 12 and pay that additional amount monthly. Another very popular option is to pay a half payment every other week. The result is you make one additional monthly payment every year. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly reduce the duration of your mortgage and lower your total interest paid.

Lump-sum Additional Payment

Some people just can't make extra payments. Remember that most mortgages will permit you to make additional payments to your principal at any point during repayment. Whenever you get some unexpected money, you can use this rule to make a one-time additional payment toward mortgage principal.

If, for example, you were to receive an unexpected windfall three years into your mortgage, you could apply this windfall toward your loan principal, resulting in huge savings and a shortened loan period. Unless the loan is quite large, even small amounts applied early in the loan period can produce huge benefits over the life of the loan.