Additional Payments Yield Big Savings
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Here's a simple trick to significantly reduce the length of your mortgage and save thousands in interest: Make extra payments that go to your loan principal. Borrowers can do this using a few different techniques. For many people,Perhaps the simplest way to organize this process is by making 1 additional payment a year. If you can't pay an additional whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another option is to pay a half payment every two weeks. The result is you will make one additional monthly payment each year. These options differ slightly in reducing the final payback amount and reducing payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.
Lump Sum Extra Payment
Some borrowers can't manage any extra payments. Keep in mind that almost all mortgages will allow you to make additional payments to your principal at any time. You can take advantage of this provision to pay down your mortgage principal when you come into extra money.
Here's an example: a few years after moving into your home, you receive a huge tax refund,a very large inheritance, or a non-taxable cash gift; , investing a few thousand dollars into your mortgage principal will significantly shorten the repayment duration of your loan and save enormously on mortgage interest paid over the duration of the mortgage loan. For most loans, even a relatively modest amount, paid early in the loan period, could offer huge savings in interest and duration of the loan.
At EMB Lenders, Inc., we answer questions about interest-saving strategies every day.
Broward: 954.539.2000 | Dade: 305.387.0345.
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