Quick answer
Quick answer: Extra payments marked to principal shrink the balance tomorrow’s interest is calculated on, so every future month’s interest charge drops. On a typical 30-year fixed, the same dollar sent in year one avoids more lifetime interest than the same dollar sent in year twenty because it runs through more compounding steps of “interest on a smaller balance.”
Why the bank’s schedule is front-loaded
Amortized loans compute interest as balance × periodic rate. Early payments are mostly interest because the balance is large; later payments are mostly principal. Anything you do to cut balance early pulls the whole schedule forward—fewer interest dollars remain to be charged. For the math behind the payment line item, read how to calculate loan interest.
Numeric example ($320k, 6.5%, +$200/mo)
Assume a 30-year fixed at 6.50% on a $320,000 starting balance, no PMI, no escrow in this table—P&I only.
| Plan | Monthly P&I | Payoff month | Approx. total interest |
|---|---|---|---|
| Minimum payment only | ~$2,023 | 360 | ~$408,100 |
| Same note + $200 to principal every month | ~$2,223 | ~281 | ~$302,700 |
Outcome: about 79 fewer monthly cycles with scheduled interest roughly $105,000 lower in this illustration—real dollars hinge on your exact rate, taxes, MI, and whether extras truly post as principal the same day each cycle.
Lump sum vs monthly extra
Lump sums cut balance immediately—great for bonuses or sale proceeds if reserves stay intact. Steady monthly extras automate discipline and start the compounding benefit sooner than “maybe later” lump sums. Biweekly plans that create an extra payment per year are really just another principal schedule—see biweekly vs true extra principal so you know what you are buying.
Pay mortgage first—or other debt?
Compare after-tax effective rates and liquidity. A 22% APR card is almost always ahead of a 6.5% mortgage in the payoff queue. A 4% taxable bond return probably is not, once you net taxes and behavioral risk. If you are weighing refi instead of prepay, run refinance break-even and payoff vs investing with your actual tax and employer-match facts.
Execution checklist
- Confirm no prepayment penalty (uncommon on agency QM, still read the note).
- Label online payments as principal and verify they do not replace a scheduled payment.
- Keep 3–6 months reserves before you aggressive-prepay a low-rate first lien.
- Re-run the plan annually after income, rate resets on other debts, or refi.
Term trade without refinancing: 15-year vs 30-year mortgage cost comparison.