Simple Ways to Save Big on Your Mortgage

Making regular extra payments toward your principal provides huge returns. Borrowers can pay against principal in various ways. Making one extra full payment once a year is probably the simplest to keep track of. However, many people won't be able to afford this huge extra payment, so splitting a single extra payment into twelve additional monthly payments is a fine option too. Another popular option is to pay half of your payment every other week. The effect here is that you make one additional monthly payment every year. These options differ a little in lowering the final payback amount and reducing payback length, but they will all significantly shorten the duration of your mortgage and lower the total interest paid over the duration of the loan.

Additional One-time payment

It may not be possible for you to pay more every month or even every year. Keep in mind that almost all mortgage contracts will allow you to pay extra on your principal at any time. You can take advantage of this provision to pay extra on your principal when you get some extra money.

If, for example, you receive a surprise windfall five years into your mortgage, you could pay this windfall toward your loan principal, resulting in enormous savings and a shorter payback period. Unless the loan is very large, even a few thousand dollars applied early in the loan period can yield huge savings over the life of the loan.