Additional Payments Provide Big Mortgage Savings
There's a trick to reduce the repayment period of your mortgage and save thousands of dollars in interest: Make additional payments that are applied to your loan principal. Borrowers use different methods to accomplish this goal. Paying 1 extra payment one time a year may be the simplest to keep track of. If you can't pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and pay that additional amount monthly. Another popular option is to pay a half payment every two weeks. The result is you will make one additional monthly payment in a year. These options differ a little in reducing the final payback amount and reducing payback length, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the duration of the loan.
One-time Additional Payment
Some borrowers can't manage extra payments. Keep in mind that most mortgage contracts will allow you to make additional payments to your principal at any time. You can take advantage of this rule to pay extra on your mortgage principal when you come into extra money. If, for example, you were to receive a very large gift or tax refund three years into your mortgage, you could pay a portion of this windfall toward your loan principal, which would result in huge savings and a shorter payback period. Unless the mortgage loan is quite large, even a few thousand dollars applied early can yield huge savings over the life of the loan.
Coastal Mortgage Corp. can walk you At Coastal Mortgage Corp., we answer questions about interest-saving strategies almost every day. Call us: 504-866-5626.
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