Additional Payments Provide Big Savings

Here's a simple trick to reduce the repayment period of your mortgage and save thousands of dollars over the course of your loan: Make extra payments that apply toward your principal. Borrowers can do this using a few different techniques. Making a single extra payment once a year is perhaps the simplest to arrange. However, many people can't pull off such an enormous additional expense, so dividing an additional payment into 12 extra monthly payments is a great option too. Finally, you can pay a half payment every two weeks. These options differ slightly in lowering the final payback amount and reducing payback length, but they will all significantly shorten the length of your mortgage and lower the total interest you will pay over the duration of the loan.

Lump-sum Additional Payment

It may not be possible for you to pay more every month or even every year. Remember that almost all mortgages will permit you to make additional payments to your principal at any time. Any time you come into extra money, you can use this provision to make a one-time additional payment on your principal.

If, for example, you were to receive a surprise windfall five years into your mortgage, you could pay this windfall toward your loan principal, which would result in significant savings and a shorter payback period. Unless the loan is very large, even small amounts applied early can produce huge savings over the life of the loan.

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can walk you through the pitfalls of getting a mortgage. Give us a call at (808) 935-0678.

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