Additional Payments Yield Big Savings
Making regular additional payments on the principal can yield big returns. Borrowers pay against principal by employing various techniques. For many people,Perhaps the easiest way to keep track is by making 1 extra payment a year. However, some people can't afford such a large extra expense, so dividing a single additional payment into twelve additional monthly payments is a fine option too. Finally, you can pay a half payment every two weeks. These options differ slightly in lowering the total interest paid and reducing payback length, but they will all significantly reduce the length of your mortgage and lower the total interest you will pay over the duration of the loan.
Lump Sum Extra Payment
Some folks just can't make any extra payments. Keep in mind that most mortgage contracts will allow you to pay extra on your principal at any time. Whenever you come into extra money, you can use this provision to pay an additional one-time payment on your mortgage principal.
Here's an example: a few years after moving into your home, you receive a larger than expected tax refund,a large legacy, or a cash gift; , investing a few thousand dollars into your mortgage principal will significantly reduce the duration of your loan and save a huge amount on interest paid over the life of the mortgage loan. For most loans, even a relatively small amount, paid early enough in the mortgage, could offer huge savings in interest and length of the loan.
Howard Financial can walk you Howard Financial can answer questions about these interest savings and many others. Call us: (610) 889-7467.