Additional Payments Provide Big Savings

Making regular additional payments toward your principal can yield huge savings. People accomplish this goal in a few ways. Making 1 extra payment once a year may be the simplest to track. But many folks won't be able to afford such a large extra expense, so splitting one extra payment into 12 additional monthly payments works as well. Another popular option is to pay a half payment every two weeks. The effect here is that you make one additional monthly payment each year. Each option produces different results, but each will significantly shorten the duration of your mortgage and lower the total interest you will pay over the duration of the loan.

Lump Sum Extra Payment

Some borrowers just can't make any extra payments. But you should remember that most mortgages will allow you to make additional payments at any time. Any time you get some extra money, consider using this rule to make a one-time additional payment on your principal. If, for example, you were to receive an unexpected windfall four years into your mortgage, paying several thousand dollars into your home's principal will shorten the duration of your loan and save enormously on mortgage interest paid over the life of the loan. Unless the loan is very large, even a few thousand dollars applied early can produce huge savings over the life of the loan.

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