Does making one extra principal payment a year to your mortgage greatly reduce the length of the loan?

Yes, this is GURANTEED SAVINGS of time and money. For example, I know of a family who were in their mid-forties. They decided to make the incremental equivalent of an extra payment per year, to principal only, by increasing their monthly mortgage payment by 1/12th--a mere $153 in their case.

Their discipline saved them $114,837 in interest and 85 payments!

NOTE: You save more time and money when you reduce your principal balance earlier in the year as compared to later. In our example, instead of increasing your monthly mortgage payment by 1/12th, you are better off increasing your monthly mortgage payment by 1/6th for the first six months of every year. See examples below:

1 lump sum ($1,834.41) at the start of every year--$119,158.76 interest and 87 payments.

1/6th of mortgage payment ($305.74) for the first six months of every year--$117,147.07 interest and 86 payments.

1/12th of mortgage payment ($153.00) for every month of every year--$114,837 interest and 85 payments.

Additional GURANTEED SAVINGS is realized when you employ one of the following five mortgage acceleration techniques:

1. Extra Principal Payments (EPP)
2. Frequent Fractional Payments (FFP)
3. A combination of EPP and FPP
4. Utilizing a Home Equity Line Of Credit (HELOC)
5. Utilizing a HELOC and Credit Card

First answer by Eric.Pirozok. Last edit by Eric.Pirozok. Contributor trust: 2 [recommend contributor]. Question popularity: 2 [recommend question]