How Does the Extra Payment Method Work?

Quick Answer: The extra payment method means adding a fixed dollar amount to each monthly mortgage payment, with the extra applied to principal. It is the simplest, most flexible, zero-cost early payoff strategy — and on a typical 30-year, $320K loan, just $200 extra per month saves about $105,000 and 6+ years.

What is the extra payment method?

The extra payment method is the most popular early mortgage payoff strategy because it is simple, requires no new debt, and is fully reversible. You add a chosen amount to your monthly payment, instruct your servicer to apply it to principal, and the extra dollars compound into massive interest savings over the life of the loan.

Step-by-step: How do I start the extra payment method today?

Confirm there is no prepayment penalty. Check page 1 of your closing disclosure or call your servicer.
Pick an extra amount you can sustain. Start with $50-$100 if you are unsure, $200-$500 if you have room.
Log into your servicer\'s portal. Find the "Make a Payment" page. Look for "Principal Only" or "Extra Principal" option.
Set it up as a recurring transfer. Auto-paid extras work better than manual payments because they survive willpower lapses.
Verify on your next statement. Make sure the extra was applied to principal, not credited as a future regular payment.

How much can the extra payment method save?

Below are real numbers on a $320,000, 30-year, 6.5% mortgage:

$50/month extra: $34K saved · 2y earlier payoff
$200/month extra: $105K saved · 6y 7mo earlier payoff
$500/month extra: $186K saved · 12y earlier payoff

Use our Extra Payment Calculator to model your specific loan.

Where should I find the extra cash?

Common sources successful homeowners tap: a paid-off car loan ($300-$500/mo freed up), a recent raise (apply 50% to mortgage), reducing one streaming or subscription service, and downgrading a vacation by $1,000 once a year.

The most overlooked source is money you are already paying: if you put less than 20% down, cancelling private mortgage insurance frees roughly $30 to $70 per month for every $100,000 borrowed. Redirect that exact amount to principal and your total monthly outlay never changes.

What are the downsides of the extra payment method?

The main downside is opportunity cost: dollars locked in home equity are not earning investment returns and are not liquid in an emergency. Best practice: keep 6 months of expenses in liquid savings, prioritize 401(k) match, and only then aggressively prepay.

Calculate Your Savings →

Frequently Asked Questions

How does the extra payment method work?

You add a fixed amount on top of your scheduled mortgage payment each month, and that extra goes 100% toward principal. Because interest is calculated on the remaining balance, every extra dollar reduces all future interest charges.

How much extra should I pay on my mortgage each month?

A common starting point is 5-10% of your monthly payment. On a $1,800/month payment, an extra $100-$200 is meaningful and usually achievable. Larger extras scale the savings linearly.

Is the extra payment method better than refinancing?

Extra payments win when current rates are similar to your existing rate or when you cannot afford closing costs. Refinancing wins when rates have dropped 1%+ and you plan to stay in the home 5+ years.

Will an extra payment lower my monthly mortgage bill?

No — extra payments shorten the loan and reduce total interest, but the scheduled monthly payment stays the same. To lower the monthly payment, you would need a recast or refinance.

How do I make sure my extra payment is applied correctly?

Use your servicer's online portal and select "Principal Only" or "Extra Principal." If mailing a check, write "Apply to principal only" in the memo line.

Can I stop making extra payments if I need the cash?

Yes. Extra payments are completely flexible — you can pause or stop them anytime without penalty (assuming no prepayment penalty in your loan).

Is the extra payment method safe?

It is one of the lowest-risk early payoff strategies. The downside is opportunity cost (dollars locked in equity could earn investment returns elsewhere), but there is no leverage or new debt involved.

What is the easiest way to start the extra payment method?

Round up your monthly payment to the nearest $50 or $100, or set up an automatic monthly principal-only transfer of $100-$300 through your servicer.

How Does the Extra Payment Method Work?

What is the extra payment method?

Step-by-step: How do I start the extra payment method today?

How much can the extra payment method save?

Where should I find the extra cash?

What are the downsides of the extra payment method?

People Also Ask

How much faster will I pay off my mortgage with extra payments?

Should I make extra payments or pay down other debt first?

Can I deduct extra mortgage payments on my taxes?

How much does an extra $50 a month save on a mortgage?

Frequently Asked Questions