How to make extra principal payments on your mortgage

Extra money only saves interest if it lowers your principal balance. Sent the wrong way, it can simply pay next month's bill early or sit in an account doing nothing. Here is how to send it, how to check it landed, and why paying early in the loan does the most.

By Ashutosh AnandUpdated September 23, 2026How we calculate

Three ways to pay extra

1. The extra-principal box online. Most servicer websites and apps have a field labeled "additional principal" or "principal curtailment" next to your regular payment. This is the simplest route: the extra rides along with a full monthly payment, so there's no doubt where it goes.
2. A separate principal-only payment. Many servicers let you make a one-time payment and pick "principal only" as the type. Use it for a bonus or tax refund. Don't pick "regular payment" or "next payment" for money meant to cut the balance.
3. By check, with a note. Write your loan number and "apply to principal only" on the memo line, and include a short signed note saying the same. Mail it to the payment address your servicer names, or ask them where principal-only checks should go.

Fannie Mae, which owns many conventional loans, tells servicers to immediately accept and apply an additional principal payment that the borrower identifies as one. The key word is identifies. Label every extra dollar.

Make sure it goes to principal, not the next payment

Money without instructions may be treated as your next monthly payment paid early. Your loan then looks "paid ahead," and nothing comes off the principal until the scheduled date. Separately, a payment smaller than a full monthly payment can be held in a suspense or unapplied funds account until enough builds up to cover a whole payment; federal rules allow this as long as the servicer discloses the amount on your statement (Regulation Z, 12 CFR 1026.36(c)).

A few habits avoid both problems:

• Pay your full regular payment first. If you're behind, Fannie Mae's rules put extra principal toward curing the delinquency before anything else.
• Label the extra as principal every time. Don't assume a past instruction carries over.
• Don't send extra instead of a payment. Paying extra doesn't let you skip a month later, and it doesn't lower your required payment unless you ask for a recast.

Check your statement

Most servicers must send a monthly statement that breaks down every payment received since the last one into principal, interest, escrow and fees, and shows any amount sent to a suspense or unapplied funds account (12 CFR 1026.41(d)). After an extra payment, look for three things:

1. The principal applied should equal your regular principal plus the extra.
2. The outstanding principal balance should have fallen by that total.
3. The suspense or unapplied funds line should be zero, and the next due date shouldn't have jumped ahead.

If it's wrong, call first, then write. A servicer's failure to apply a payment to principal, interest or escrow under the loan terms is an error you can dispute in writing (Regulation X, 12 CFR 1024.35). The CFPB explains how: send the letter to the address your servicer designates for errors, and keep a copy.

Timing matters: pay early if you can

Take a $320,000 30-year loan at 6.5% starting in January 2027. The monthly principal and interest payment is $2,022.62, and in the first month $1,733.33 of it is interest while only $289.29 reduces the balance. Here is what the same one-off $10,000 extra payment does at four points in the loan:

Paid with the first payment, $10,000 saves $53,943 of interest. Paid in year 21, it saves $8,599. The rate is the same; the difference is time. A dollar of principal paid early stops collecting interest for every remaining month of the loan, and early on there are many more of those months. That's also why the money is locked away longer, which is the trade-off to weigh.

Calculated with the same engine as our calculators, rounding interest to the cent each month.

Automatic monthly extras or one-off payments?

Both work. On the same loan, an automatic $200 extra every month saves $105,428 and pays the loan off 6 yrs 7 mo sooner. Paying $2,400 once a year each December instead saves $101,552 and finishes 6 yrs 5 mo sooner. The gap is $3,876: what matters most is how much you put in, and how early.

• Automatic extras suit steady income. Set the extra-principal amount in your autopay, then check the first statement to confirm it lands as principal.
• One-offs suit bonuses, refunds or irregular income, and leave you free to skip a month without changing anything.

A monthly extra also works as a do-it-yourself biweekly plan without the fees some third-party programs charge. Compare them in the biweekly mortgage calculator.

Prepayment penalties: how to check, and the federal limits

A prepayment penalty is a fee some lenders charge if you pay off all or part of a mortgage early. Your Loan Estimate and Closing Disclosure both say, in the Loan Terms table, whether your loan has one (12 CFR 1026.37(b)(4)), and the monthly statement rule above requires your statement to mention one too.

For most home loans closed under the federal ability-to-repay rule, which took effect on January 10, 2014, Regulation Z (12 CFR 1026.43(g)) allows a penalty only when all of these are true:

• the rate can't increase after closing (a fixed or step rate, not an adjustable one);
• the loan is a qualified mortgage and not a higher-priced mortgage loan;
• the penalty is otherwise permitted by law, and the lender also offered you a comparable loan without one.

Even then, it can't apply after the first three years, and it's capped at 2% of the amount prepaid in years one and two and 1% in year three. On the $10,000 example that's at most $200 in the first two years and $100 in the third. The CFPB notes that some penalties apply only to paying off the whole loan or a large amount at once, so ask your servicer before a big prepayment.

When not to prepay

Extra principal is hard to get back, and your required payment stays the same no matter how much you've prepaid. Hold off if:

• You don't have an emergency fund. Several months of expenses in cash come first.
• You carry high-interest debt. Credit cards and loans at rates above your mortgage rate should go first.
• You're not getting your full employer retirement match. That match is an instant return no mortgage rate can beat.

Our guide on paying off your mortgage early covers the order in more detail, and what investing has to earn to beat prepaying.

Related tools

• Extra payment calculator: what monthly, yearly or lump-sum extras do to your payoff date and interest.
• Mortgage recast calculator: lower your required payment after a large principal payment.
• Pay extra vs invest calculator: whether the money does more in the market.
• How to get rid of PMI: extra principal can end PMI sooner.

For education only; not legal or financial advice. How payments are applied depends on your loan documents and your servicer's rules, and your servicer's figures are final. The loan in the examples is illustrative. Sources checked September 23, 2026.