Guide
Do Extra Mortgage Payments Lower Your Monthly Payment?
On a typical fixed-rate mortgage, paying extra toward principal reduces the balance and can shorten repayment. It usually does not reduce the required monthly payment automatically. If your goal is a smaller monthly bill rather than an earlier finish date, ask about your lender's options before sending a lump sum.
Where does the extra money go?
Your normal payment covers interest and some principal. An additional amount correctly applied to principal reduces the balance used to calculate later interest. Keeping the scheduled payment after that reduction generally means more of subsequent payments pays off the loan.
Confirm that the lender applies the extra to principal, not simply to a future scheduled payment. The treatment of extra payments, overdue amounts and fees depends on your loan agreement.
Why doesn't the required payment fall?
A fixed-rate mortgage's scheduled principal-and-interest payment is based on its repayment agreement. A smaller outstanding balance does not normally rewrite that schedule. Instead, the loan can finish earlier if you continue making the original payment.
Your total monthly bill may still change because property taxes or insurance change. That is separate from the principal-and-interest effect of paying extra.
What is recasting, and how is it different?
A recast recalculates scheduled payments using a reduced balance over the remaining term, generally keeping the existing interest rate. Availability, minimum lump sums and fees vary; not every loan is eligible.
Refinancing replaces the loan with a new one and can change the interest rate and term. Compare its costs carefully. Neither a recast nor refinancing happens automatically when you make an ordinary extra payment.
Use the calculator for the starting payment
In the Mortgage Calculator, enter a home price of 300,000, down payment of 60,000, rate of 6 and term of 30 years. It shows a 240,000 loan and a scheduled principal-and-interest payment of 1,438.92 per month.
An extra 100 would make that month's principal-and-interest payment plus extra principal 1,538.92, before taxes and insurance. This tool has no extra-payment or recast field, so it does not calculate the resulting payoff date or savings.
Before paying extra
Check for prepayment penalties, ask how to mark principal-only payments and keep enough money available for emergencies. Request an updated payoff illustration from the lender to confirm the effect on your actual mortgage.
Sources and further reading
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