Additional Payments Yield Big Savings
There's a trick to significantly reduce the length of your mortgage and save you thousands in interest: Make additional payments that are applied toward your principal. Borrowers can pay more on principal in many different ways. Making a single extra full payment once every year is probably the easiest to track. However, some folks can't afford this huge extra expense, so dividing an additional payment into twelve additional monthly payments works too. Finally, you can commit to paying half of your mortgage payment every two weeks. These options differ a little in reducing the total interest paid and reducing payback length, but they will all significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
One-time Additional Payment
It may not be possible for you to pay more every month or even every year. But it's important to note that most mortgages allow you to make additional principal payments at any time. Whenever you come into extra money, consider using this rule to make an additional one-time payment on your principal.
If, for example, you were to receive a very large gift or tax refund four years into your mortgage, paying a few thousand dollars into your mortgage principal will reduce the repayment duration of your loan and save a huge amount on mortgage interest paid over the duration of the loan. For most loans, even a modest amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
Family Mortgage Company of Hawaii, Inc. NMLS #244497 can walk you the mortgage process. Give us a call at (808) 935-0678.
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