Mortgage Savings Tips

Paying consistent additional payments toward your principal balance provides big savings. Borrowers employ various techniques to meet this goal. Making 1 additional full payment one time every year is perhaps the easiest to track. However, some folks will not be able to pull off such a large additional payment, so dividing one additional payment into twelve extra monthly payments works too. Finally, you can pay a half payment every two weeks. These options differ slightly in reducing the final payback amount and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.

Lump Sum Extra Payment

It may not be possible for you to pay extra every month or even every year. But you should remember that most mortgage contracts will allow additional payments at any time. You can benefit from this rule to pay extra on your principal when you come into extra money.

If, for example, you receive an unexpected windfall four years into your mortgage, investing several thousand dollars into your home's principal will significantly reduce the repayment duration of your loan and save a huge amount on interest over the life of the loan. For most loans, even this relatively small amount, paid early in the mortgage, could offer huge savings in interest and length of the loan.

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