Extra Payments Yield Big Savings

There's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars over the course of your loan: Make extra payments that are applied toward your loan principal. People employ various techniques to accomplish this goal. Making one extra full payment once a year may be the easiest to keep track of. If you can't pay an additional whole payment all at once, you can divide your payment by 12 and write a check for that additional amount monthly. Another option is to pay a half payment every other week. The effect here is that you make one extra monthly payment each year. These options differ a little in lowering the final payback amount and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower your total interest paid.

Lump Sum Extra Payment

It may not be possible for you to pay down your principal every month or even every year. Remember that almost all mortgage contracts will permit you to pay extra on your principal at any point during repayment. Any time you come into unexpected money, consider using this rule to pay an additional one-time payment toward principal.

Here's an example: five years after buying your home, you receive a huge tax refund,a large inheritance, or a non-taxable cash gift; , you could apply a portion of this money toward your loan principal, resulting in enormous savings and a shorter loan period. For most loans, even a small amount, paid early enough in the loan period, could offer big savings in interest and length of the loan.

Standard Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 818-999-6444.

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