Huge Interest Savings: Available to Anyone
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Paying consistent extra payments toward your loan principal provides enormous returns. Borrowers pay extra in a few ways. Paying 1 extra payment one time per year is perhaps the easiest to track. If you can't afford to pay an additional whole payment in one month, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another option is to pay half of your payment every two weeks. The effect here is that you make one extra monthly payment every year. These options differ slightly in reducing the total interest paid and reducing payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.
Lump-sum Additional Payment
It may not be possible for you to pay more every month or even every year. Remember that almost all mortgages will permit you to make additional payments to your principal at any time. You can take advantage of this provision to pay down your principal any time you come into extra money.
If, for example, you were to receive a large gift or tax refund three years into your mortgage, investing several thousand dollars into your home's principal will shorten the period of your loan and save a huge amount on mortgage interest over the life of the loan. Unless the loan is very large, even a few thousand dollars applied early can produce huge benefits over the duration of the loan.
At First Residential Mortgage, we answer questions about money-saving strategies every day. Give us a call: 276-782-1677.