Making consistent additional payments on the loan principal provides singificant returns. You pay extra on principal in various ways. Paying 1 additional payment one time per year is perhaps the easiest to track. However, many people can't pull off such a large additional payment, so splitting an extra payment into 12 extra monthly payments is a great option too. Another option is to pay a half payment every other week. The effect here is that you make one additional monthly payment every year. These options differ a little in reducing the total interest paid and reducing payback length, but they will all significantly reduce the length of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay down your principal every month or even every year. But you should remember that most mortgages allow additional payments at any time. Whenever you get some extra cash, you can use this rule to pay a one-time additional payment on mortgage principal. If, for example, you receive a very large gift or tax refund three years into your mortgage, you could apply a portion of this windfall toward your mortgage loan principal, which would result in huge savings and a shorter payback period. For most loans, even a relatively small amount, paid early in the mortgage, could offer huge savings in interest and duration of the loan.
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