Can I Make Extra Payments on My Mortgage?

Yes. Almost every home loan lets you pay extra toward principal at any time, and most charge nothing for it: FHA and VA rules guarantee the right to prepay without a fee, and Fannie Mae does not buy loans that carry a prepayment penalty. Tell your servicer the extra money is for principal, or it may not reduce your balance right away. Extra principal shortens the loan and cuts total interest, but your required monthly payment stays the same unless you ask the servicer to recast the loan.

How do you make sure an extra payment goes to principal?

Your servicer is the company that collects your payments. It applies money according to your loan documents and its own payment instructions, so give it a clear instruction each time:

1. Use the servicer's principal option. If your servicer's payment portal or coupon has a field for additional principal, enter the extra amount there. If you mail a check, write "apply to principal only" and your loan number on it, or send a separate check with a note.
2. Pay the regular payment in full. Extra money sent while you are behind goes to the past-due amount first. Fannie Mae's servicing guide requires servicers to apply it to the delinquency before principal.
3. Check the next statement. Your monthly statement must show the total of payments received since the last statement and how that total was applied to principal, interest, escrow, and fees, plus any amount held in a suspense account (where a servicer holds money it has not yet applied). It must also list each transaction and your principal balance, which should drop by the extra amount.
4. Dispute a misapplied payment in writing. Failing to apply a payment to principal, interest, or escrow under the loan terms is an error you can raise with a written notice of error sent to the address your servicer designates for errors. The servicer must acknowledge it within 5 business days and generally correct it or explain why it found no error within 30 business days. The prompt payment crediting rule covers the date your regular payment must be credited.

On a loan Fannie Mae owns, the servicer must apply a payment you identify as a principal curtailment (an extra principal payment) right away if your loan is current. VA rules are looser on timing: a partial prepayment made on a day other than your due date does not have to be credited until the next due date or 30 days after you pay, whichever comes first. The VA right to prepay covers partial payments of at least one monthly installment or $100, whichever is less.

Can your lender charge a prepayment penalty?

A prepayment penalty is a fee for paying off all or part of the loan early. Whether your loan can have one depends on who backs it:

When a penalty is allowed, federal rules cap it at 2% of the amount prepaid in the first 2 years and 1% in year 3, with none after the third year. Prepaying $50,000 in year 2 on such a loan could cost up to $1,000 ($50,000 x 2%). Loans closed before January 10, 2014 follow the terms of the note and state law.

The CFPB notes that penalties usually apply only when you pay off the whole loan, for example by selling or refinancing, and normally not to small extra payments. To check your loan, look at the "Prepayment Penalty" line in the Loan Terms table on page 1 of your Loan Estimate or Closing Disclosure. Your monthly statement must also say whether a prepayment penalty can be charged.

How much does paying extra save?

The savings come from lowering the balance that interest is charged on, so money paid early in the loan saves the most. The example below is a $300,000, 30-year fixed loan at 7.32%, Freddie Mac's average 30-year rate for October 22, 2026. The regular principal and interest payment is $2,060.79, and total interest over 30 years is $441,885.

Each extra dollar of principal stops accruing interest once the servicer credits it, which on a VA loan can be as late as the next due date: $200 credited in month 1 saves $1.22 in interest in month 2 ($200 x 7.32% / 12), and that saving carries through every remaining month. How each payment splits between principal and interest shows why early payments are mostly interest.

Money you prepay becomes home equity. Getting it back as cash means selling, refinancing, or borrowing against the home, so keep enough savings outside the house before sending large lump sums.

How do you lower your monthly payment after a large prepayment?

To get a lower required payment after a large prepayment, ask your servicer for a recast, also called re-amortization: the servicer recalculates your payment on the new, lower balance over the remaining term at the same interest rate. No new loan, appraisal, or credit check is involved, which is what separates a recast from a refinance.

No federal rule requires a servicer to offer a recast. Fannie Mae's servicing guide allows one at the borrower's request after a substantial principal curtailment and has the servicer document it on Fannie Mae's re-amortization agreement (Form 181), but it does not set a minimum amount or a fee. Ask your servicer for its minimum prepayment, its fee, and whether the loan's owner allows recasting before you send the money.

Using the $50,000 prepayment from the table:

• Balance after 60 regular payments: $283,339.36.
• Balance after the $50,000 prepayment: $233,339.36.
• Recast payment over the remaining 300 months at 7.32%: $1,697.13, which is $363.66 a month less than $2,060.79.
• Interest saved over the life of the loan: about $59,099 with the recast, compared with $170,610 if you keep paying $2,060.79.

A recast trades part of the interest savings for a lower required payment. If you later want to pay off the loan in full, send the servicer a written request for a payoff statement; the payoff statement rule gives the servicer 7 business days to send one. For what else your servicer handles, see what loan servicing is.