Extra Payments Provide Big Savings

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There's a trick to significantly reduce the length of your mortgage and save thousands in interest: Make additional payments that go to the loan principal. Borrowers accomplish this goal in a few different ways. Making one additional payment one time every year may be the easiest to arrange. Of course, some folks will not be able to afford such a large extra expense, so dividing one additional payment into twelve extra monthly payments is a fine option too. Finally, you can commit to paying a half payment every other week. These options differ a little in reducing the final payback amount and reducing payback length, but each will significantly reduce the length of your mortgage and lower your total interest paid.

Lump-sum Additional Payment

Some folks can't manage extra payments. Remember that most mortgages will allow you to pay extra on your principal at any point during repayment. You can take advantage of this provision to pay extra on your mortgage principal any time you get some extra money. If, for example, you were to receive a very large gift or tax refund five years into your mortgage, you could pay a portion of this windfall toward your loan principal, resulting in significant savings and a shortened payback period. Unless the loan is quite large, even small amounts applied early in the loan period can produce huge savings over the life of the loan.

Abacus Mortgage & Loans can walk you Abacus Mortgage & Loans has your mortgage answers. Call us at 5036903088.