Extra Principal Payments Guide: How to Pay Off Your Mortgage Early
Learn how extra monthly principal payments reduce total mortgage interest accumulation, lower your payoff timeline, and maximize lifetime savings.
By Sarah Jenkins, CFA
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Reviewed by David Vance, CFP
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5 min read
Why Make Extra Principal Payments?
Because mortgage interest is calculated monthly based on your remaining principal loan balance, applying extra money directly to your principal reduces the balance upon which future interest is calculated. Every extra dollar paid down early compounds into compounding lifetime interest savings.
3 Ways to Pay Off Your Mortgage Early
- Fixed Extra Monthly Payment: Adding $100–$300 to your standard monthly mortgage payment.
- Bi-Weekly Payment Schedule: Paying half your monthly payment every 2 weeks results in 26 half-payments (13 full monthly payments per year).
- Annual Lump-Sum Principal Contributions: Applying annual tax refunds or work bonuses directly to loan principal.