Simple Ways to Save on Your Mortgage

Paying regular extra payments on your loan principal will provide significant savings. Borrowers accomplish this goal in a few different ways. Making 1 extra payment once per year may be the simplest to track. If you can't pay an extra whole payment in one month, you can divide your payment by 12 and write a check for that additional amount monthly. Another popular option is to pay a half payment every two weeks. The effect here is that you make one additional monthly payment each year. These options differ slightly in lowering the total interest paid and shortening payback length, but each will significantly shorten the length of your mortgage and lower your total interest paid.

Lump-sum Additional Payment

It may not be possible for you to pay more every month or even every year. Remember that most mortgage contracts will allow you to make additional payments to your principal at any time. Any time you come into unexpected cash, you can use this provision to pay a one-time additional payment on principal. If, for example, you receive a very large gift or tax refund just a few years into your mortgage, you could apply this windfall toward your loan principal, resulting in enormous savings and a shortened payback period. For most loans, even this relatively modest amount, paid early enough in the mortgage, could offer big savings in interest and duration of the loan.