To pay extra toward your mortgage principal, you typically need to make an additional payment (or add extra to your regular payment) and specifically designate it as a principal-only payment with your loan servicer. How you do this depends on your servicer’s system, but the options usually include online payments, mailing a separate check, or calling customer service. The key step most people miss: if you don’t clearly label extra money as a principal-only payment, your servicer may apply it to your next month’s payment instead, which means part of it goes to interest rather than reducing your balance.
How to Submit a Principal-Only Payment
Most mortgage servicers offer several ways to make extra principal payments, but the process varies. Start by logging into your servicer’s online portal. Many portals have a specific option for “additional principal” or “principal-only” payments, separate from your regular monthly payment. If you see that option, use it. The system will apply the full amount directly to your loan balance.
If your servicer’s website doesn’t have a clear principal-only option, or if you prefer to pay by check, mail a separate check with “principal only” written in the memo line. Some servicers have a specific mailing address for extra payments that’s different from the one for regular monthly payments. Don’t combine a principal-only payment with your regular monthly payment in one check unless your servicer’s instructions say that’s fine, because the servicer may not split it correctly.
When in doubt, call your servicer’s customer support line. They can walk you through the process, confirm how to label your payment, and tell you whether their system automatically applies overpayments to principal or to the next scheduled payment. Review your loan contract or your servicer’s website for their specific policy on how additional payments are applied. After you make any extra payment, check your next statement to confirm it reduced your outstanding principal balance rather than being credited as an advance on your next monthly payment.
Strategies for Paying Down Principal Faster
There are a few common approaches, and they vary in how much effort they require and how much interest they save.
Add a fixed amount each month. This is the simplest approach. Take your monthly payment, divide it by 12, and add that amount to every payment. On a loan with a $733 monthly payment, for example, you’d add about $61 each month. Over the life of a 30-year loan, this is equivalent to making one extra full payment per year, which can shave roughly 7 years off the loan and save tens of thousands in interest.
Make biweekly payments. Instead of paying once a month, you pay half your monthly payment every two weeks. Because there are 26 two-week periods in a year, you end up making 13 full payments instead of 12. The effect is similar to adding a monthly surcharge, but with one important difference: biweekly plans take a full year before the extra payments start chipping away at principal, because the additional half-payments accumulate gradually. Adding extra to your monthly payment starts reducing principal immediately. In a side-by-side comparison on a $100,000 loan at 8%, the monthly add-on approach paid off the loan two months sooner and saved about $1,700 more in interest than the biweekly plan, simply because the extra money hit the principal earlier.
Make lump-sum payments. If you receive a bonus, tax refund, or inheritance, you can make a one-time principal-only payment. This has an outsized effect early in your loan, when your balance is highest and most of your regular payment goes to interest. A $5,000 lump sum in year two of a 30-year mortgage saves far more interest over the life of the loan than the same $5,000 applied in year 20.
Extra Payments vs. Mortgage Recasting
When you make extra principal payments, your loan balance drops faster and you pay less total interest, but your required monthly payment stays the same. You’ll simply pay the loan off sooner. This gives you flexibility: you can make extra payments when your budget allows and skip them when money is tight, with no penalty.
A mortgage recast works differently. You make a large lump-sum payment toward principal, then ask your lender to recalculate (reamortize) your remaining payments based on the lower balance. Your monthly payment goes down, but the loan’s end date stays the same. Lenders typically charge a few hundred dollars for a recast. This option makes sense if your goal is a lower monthly obligation rather than a shorter loan term. Not all lenders or loan types offer recasting, so check with your servicer before planning on it.
Check for Prepayment Penalties First
Most modern mortgages don’t carry prepayment penalties, but it’s worth confirming before you start sending extra money. Federal rules limit prepayment penalties to the first three years of the loan. During the first two years, the penalty can’t exceed 2% of the outstanding balance. In the third year, it’s capped at 1%. After three years, no penalty is allowed. Some states ban prepayment penalties on residential mortgages entirely.
If your loan has a prepayment penalty, it must appear on your monthly billing statement or in your coupon book and in any interest rate adjustment notices. Lenders that offer loans with prepayment penalties are also required to offer an alternative loan without one. These federal rules apply to mortgages originated on or after January 10, 2014. If your loan is older than that, check your original loan documents for prepayment terms.
Why Early Payments Save the Most
Mortgages are front-loaded with interest. In the early years, most of your monthly payment covers interest charges, and only a small portion reduces principal. As the balance shrinks, the interest-to-principal ratio flips. This is why extra principal payments made early in the loan have the biggest impact: every dollar you apply to principal in year one or two eliminates interest that would have compounded over the remaining 28 or 29 years.
To see the effect on your specific loan, look at your amortization schedule, which your servicer can provide or you can generate with a free online calculator. It shows how much of each payment goes to interest versus principal, and you can model what happens when you add extra payments at different points in the loan’s life. Even modest extra payments of $50 or $100 a month, started early, can cut years off a 30-year mortgage and save thousands in interest over the full term.