REPAYMENT BASICS

How extra payments reduce mortgage interest

Interest is normally calculated from the outstanding principal. When an eligible extra payment is applied directly to principal, the balance used for later interest calculations becomes smaller.

Timing matters

An extra principal payment made earlier usually affects more future monthly interest calculations than the same amount paid later. That does not mean every early payoff is automatically the best personal decision: fees, a variable rate and the need for liquid savings all matter.

Confirm the lender's payment instructions

Before transferring money, confirm that the lender will treat it as a principal-only payment, whether there is a cap or prepayment charge, and whether your regular payment will change or the term will shorten.