How to Make a Large Mortgage Principal Payment

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Mortgages have fixed monthly amortization schedules, so the amount of your monthly payment will not adjust unless you have an adjustable rate mortgage. However, the amount of your payment that goes towards paying down the principal is adjusted each month based on how much you owe. If you make extra principal payments on your mortgage in addition to your scheduled monthly payment, you can reduce the term of your mortgage, which can significantly reduce the amount of interest you will pay over the life of the loan.

Write a separate check for any amount you want to pay above your monthly payment. For example, if your mortgage payment is $1,200 each month and you want to pay $6,000, write one check for $1,200 and one for $4,800.

Write "Payment for Principal" on the memo line for the mortgage principal payment. In this case, the note would go on the $4,800 check.

Check the box for an extra principal payment on your mortgage billing statement so the lender does not apply the money towards your next monthly payment.

Tips & Warnings

  • You should consider whether you can earn a higher rate of return on your money than the rate of interest you pay. For example, if you can earn 10 percent by investing the extra money and you are only paying 6 percent interest, you are mathematically better off investing the money than paying down your mortgage.
  • Making extra principal payments will not reduce your future monthly payments.
  • If you fail to specify that your extra payment is intended to reduce your outstanding balance, the bank may apply it to future payments instead.

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