Huge Interest Savings: Available to Anyone
Making regular extra payments on the principal can yield big savings. People pay extra in several ways. Paying 1 extra full payment once every year is likely the simplest to keep track of. But some people can't swing such an enormous additional payment, so splitting a single extra payment into twelve extra monthly payments works as well. Another very popular option is to pay a half payment every other week. The result is you make one extra monthly payment in a year. Each option produces slightly different results, but each will significantly shorten the length of your mortgage and lower the total interest paid over the duration of the loan.
Lump Sum Extra Payment
Some folks just can't make any extra payments. But remember that most mortgage contracts will allow additional principal payments at any time. Any time you get some unexpected cash, consider using this rule to make a one-time additional payment toward mortgage principal.
If, for example, you receive a large gift or tax refund four years into your mortgage, you could apply a portion of this windfall toward your loan principal, resulting in significant savings and a shorter loan period. Unless the mortgage loan is very large, even a few thousand dollars applied early in the loan period can produce huge benefits over the life of the loan.