U.S. Mortgage Index

Extra principal payment

Definition

An extra principal payment is money paid above the scheduled amount and applied to unpaid principal. It is a form of prepayment, not a new loan.

In plain English

The scheduled payment covers interest and the planned principal. An extra principal payment is additional money the borrower directs to the remaining debt. Whether a loan allows that, and whether a fee applies, depends on the note. This page does not promise interest savings.

Technical definition

CFPB treats principal as the remaining loan amount and describes prepayment as paying all or part of a mortgage early. An extra principal payment is a partial prepayment applied to that remaining amount.

Why it matters

Borrowers who send more than the amount due need the principal-application idea, not a biweekly-plan sales pitch.

Example

Taylor pays the regular installment and adds more money marked for principal. The extra amount reduces the remaining debt after the scheduled interest is covered.

Sources reviewed