Paying consistent extra payments on your loan principal yields big returns. People make this happen in several ways. Paying 1 additional full payment once per year is perhaps the simplest to keep track of. However, some folks can't afford this huge additional payment, so dividing an additional payment into twelve extra 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 final payback amount and shortening payback length, but each will significantly reduce the duration of your mortgage and lower the total interest you will pay over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. Remember that almost all mortgages will permit you to pay extra on your principal at any time. You can take advantage of this rule to pay extra on your principal when you get some extra money. Here's an example: a few years after moving into your home, you get a larger than expected tax refund,a very large inheritance, or a non-taxable cash gift; , investing several thousand dollars into your mortgage principal will significantly reduce the period of your loan and save a huge amount on mortgage interest over the duration of the loan. For most loans, even this small amount, paid early in the loan period, could offer big savings in interest and in the duration of the loan.
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