As mentioned above, the extra principal payment program pays a little extra toward the principal balance of the loan, over and above the regular monthly requirements. By paying a little extra each month or once in a while, the borrower can dramatically lower the term of the loan.
For example, a 30-year $100,000 loan with an interest rate of 7.75% has a monthly payment of $716.41. If the borrowers were to make a monthly payment of $816.41 (an extra $100 toward principal), the loan would be paid off in about 24 years, for a total savings of about $50,000.
For more information, please consult the "Prepayments to the Principal" article in the "Mortgage Industry" section.
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