Making consistent additional payments toward the principal can yield huge returns. People use different methods to meet this goal. Paying one additional payment once a year may be the simplest to keep track of. If you can't pay an additional whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Finally, you can pay half of your mortgage payment every two weeks. These options differ a little in reducing the final payback amount and shortening payback length, but they will all significantly shorten the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgages allow additional payments at any time. Whenever you get some unexpected money, consider using this provision to make a one-time additional payment toward your mortgage principal.
If, for example, you were to receive a large gift or tax refund four years into your mortgage, paying a few thousand dollars into your mortgage principal can shorten the duration of your loan and save enormously on interest paid over the duration of the mortgage loan. Unless the mortgage loan is very large, even small amounts applied early can produce huge benefits over the life of the loan.
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