If I make a large principal payment after closing, what happens to my regular mortgage payment?
A large additional principal payment generally lowers your outstanding loan balance. Because interest accrues based on the remaining balance, paying down principal can reduce the interest that accrues going forward. If you continue making the same scheduled payment, more of each payment may then go toward principal.
However, your scheduled monthly payment usually does not automatically change after an extra principal payment. Before sending a large payment, ask your mortgage servicer to explain when the payment can be made, how it should be submitted, and how it will be applied. Confirm that the funds will be credited to principal rather than handled as a scheduled payment.
How can I make an additional principal payment on my mortgage?
Contact your mortgage servicer before sending an additional principal payment. The available method may depend on the size of the payment and the servicer’s procedures. Possible methods can include:
- Using the servicer’s online payment portal
- Arranging the payment with assistance by phone
- Sending a wire transfer using instructions supplied by the servicer
Confirm the correct account information and the steps required to designate the funds as an additional principal payment. If the servicer instructs you to send a wire, verify the instructions directly with the servicer before transferring any money. Afterward, review the account activity or contact the servicer to confirm how the payment was applied.
Can I pay down most of my mortgage balance now and pay off the remainder later?
Possibly. A homeowner may be able to make a substantial principal payment, leave a smaller balance outstanding, and pay off that remainder later. Whether this is permitted, when the payment can be made, and how the funds must be submitted can depend on the loan terms and the servicer’s procedures.
Before sending the substantial payment, ask the servicer for current instructions and confirm whether any timing restrictions apply. When you are ready to pay the remaining balance, request an official payoff statement. The payoff statement provides the amount needed through the intended payoff date and includes applicable charges that must be accounted for in the final payment.
Does a mortgage have a prepayment penalty?
It depends on the specific loan terms. A prepayment penalty is a charge that may apply when a borrower pays off a mortgage early, but not every mortgage contains one.
Review your loan documents for any provision addressing prepayment or early payoff. Before making a substantial principal payment or paying off the loan, ask the lender or servicer to confirm in writing whether a prepayment penalty applies. Written confirmation can help you understand the applicable loan terms before sending funds.
