Making regular additional payments toward your loan principal yields enormous savings. Borrowers use different methods to meet this goal. Making a single additional full payment once every year is perhaps the simplest to keep track of. If you can't afford to pay an extra whole payment in one month, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another option is to pay half of your payment every two weeks. The effect here is that you will make one extra monthly payment every year. Each of these options produces slightly different results, but each will significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
Some people just can't make any extra payments. But remember that most mortgages will allow you to make additional payments at any time. Any time you come into unexpected cash, you can use this rule to pay a one-time additional payment toward mortgage principal. If, for example, you were to receive a large gift or tax refund three years into your mortgage, you could apply a portion of this money toward your loan principal, resulting in significant savings and a shorter payback period. Unless the loan is quite large, even a few thousand dollars applied early in the loan period can produce huge benefits over the duration of the loan.
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