Extra Payments Yield Huge Savings

There's a simple trick to reduce the repayment period of your mortgage and save thousands in interest: Make extra payments which go to the loan principal. You pay more on principal by employing various techniques. Making 1 additional payment one time every year may be the simplest to keep track of. But some folks can't swing such a large extra payment, so dividing an extra payment into 12 extra monthly payments is a great option too. Another very popular option is to pay half of your payment every other week. The effect here is that you will make one extra monthly payment every year. Each of these options produces slightly different results, but they will all significantly shorten the duration of your mortgage and lower your total interest paid.

Lump Sum Extra Payment

It may not be possible for you to pay down your principal every month or even every year. But remember that most mortgage contracts allow additional payments at any time. Whenever you get some extra cash, consider using this provision to make an additional one-time payment toward mortgage principal. Here's an example: five years after moving into your home, you receive a huge tax refund,a large legacy, or a cash gift; , you could apply a portion of this money toward your loan principal, resulting in huge savings and a shorter loan period. For most loans, even this relatively small amount, paid early in the mortgage, could offer big savings in interest and in the duration of the loan.

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