The Sooner You Make Extra Payments. The More Money You Save!

Tuesday, 21 December 2010 13:15

Is it better to pay a lump sum payment on my mortgage once per year or to divide the amount into equal monthly amounts?  It is better to pay a monthly amount rather than waiting and paying a larger amount once in a while.  The reason is that extra payments received early reduce the balance early, which reduces the monthly interest due on all future payments, which increases the portion of all future payments that is applied to principal.  This principal is true for any type of mortgage whether fixed or adjustable.

While determining whether to pay extra on your mortgage, compare your other debts with higher rates and consider whether you should pay them first.