Additional Payments Yield Big Savings
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Paying regular additional payments on the loan principal will provide big returns. Borrowers can do this in several ways. For many people,Perhaps the simplest way to keep track is by making 1 additional payment a year. If you can't afford to pay an additional whole payment in one month, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Another option is to pay a half payment every other week. The effect here is that you will make one extra monthly payment each year. These options differ a little in reducing the final payback amount and shortening payback length, but each will significantly shorten the duration of your mortgage and lower your total interest paid.
One-time Additional Payment
Some borrowers can't manage extra payments. Remember that most mortgage contracts will permit you to pay extra on your principal at any time. You can benefit from this provision to pay down your mortgage principal any time you come into extra money.
If, for example, you were to receive a large gift or tax refund just a few years into your mortgage, you could apply a portion of this windfall toward your loan principal, which would result in enormous savings and a shortened payback period. For most loans, even this small amount, paid early enough in the mortgage, could offer huge savings in interest and length of the loan.
At Bay Area Capital Funding ., we answer questions about interest-saving strategies every day. Give us a call: (650) 631-1800.
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