Making consistent extra payments toward your principal balance yields singificant returns. People use different methods to accomplish this goal. Making a single additional full payment one time a year is likely the easiest to track. Of course, many folks won't be able to pull off such a large extra payment, so splitting an additional payment into 12 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. 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.
Some folks can't manage any extra payments. Remember that almost all mortgages will permit you to make additional payments to your principal at any time. Any time you come into unexpected cash, you can use this provision to make a one-time additional payment on your principal. If, for example, you were to receive an unexpected windfall four years into your mortgage, paying a few thousand dollars into your mortgage principal will reduce the repayment period of your loan and save enormously on mortgage interest paid over the life of the loan. Unless the loan is quite large, even a few thousand dollars applied early in the loan period can yield huge savings over the life of the loan.
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