How this number is made
An extra amount applied to principal shortens the loan and cuts interest. This page does not treat the extra as a prepayment penalty or as an escrow change.
- Use the remaining balance and the years actually left, not the original term.
- The extra is added every month on top of principal and interest.
Formula
Each month interest = balance × rate ÷ 12. The scheduled payment plus the extra reduces the balance. Months and interest are the sum until the balance is gone.
Worked example
With the figures already in the form, interest saved is $82,544.
Questions
Does the lender have to accept this?
Most fixed-rate mortgages allow extra principal. Some notes limit how often, or apply the extra only on the due date. Check the note before you send a large extra.
Should the extra go to escrow?
No. An extra that the servicer parks in escrow does not reduce principal. The payment coupon should say principal.