According to Duane Buziak, a principal only payment mortgage move is an extra payment applied straight to your loan balance rather than to interest or a future installment. Every dollar shrinks what you owe and the interest charged on it for the rest of the loan. This article covers how the mechanics work, what a real example saves, how to submit one correctly, and when your cash has a better job to do elsewhere.
How a Principal Only Payment Works on Your Mortgage
Principal is the amount you borrowed and still owe. Interest is the lender’s charge for lending it. Amortization is the schedule that splits each fixed monthly payment between the two. Early in a 30-year loan, most of each payment is interest. Late in the loan, most of it is principal. That is why the first years feel like you are barely moving the balance.
Interest accrues on the outstanding balance, so a lower balance means less interest in every month that follows. Your scheduled payment does not change when you send extra principal. What changes is how much of that same payment goes to principal next month, which is slightly more, and then slightly more again. The payoff date moves closer as the effect compounds.
Three points trip people up:
- Your required payment stays the same. An extra principal payment does not lower the monthly amount due. Only a recast, covered later, re-amortizes the loan to a lower payment.
- It does not skip your next due date. You still owe the next installment on schedule, even if you are years ahead on principal. The exception is when a servicer applies your money as a prepayment of a future installment, which is exactly what you want to avoid.
- It shortens the term. With the payment unchanged and the balance lower, the loan simply ends sooner.
The last misconception is the most costly. Money sent without instructions may be treated as an early regular payment or held in suspense until it covers a full installment. Servicers set their own rules for how partial and extra payments are applied, and the CFPB publishes consumer guidance on mortgage servicing and what to expect from your servicer. Fannie Mae’s Servicing Guide sets the baseline policies that servicers of Fannie Mae loans follow. The practical takeaway: never assume your extra money landed on principal. Tell the servicer, then verify.
Duane Buziak’s Worked Example: What $300 a Month Extra Saves
This is Duane Buziak’s standard framework for checking whether extra principal is worth it: compute the baseline, compute the accelerated loan, then compare total interest. The numbers below are an illustration. The 6.25% rate is a sample rate for a 30-year conventional loan as of October 2026, not a quote and not current market pricing.
The baseline loan
Loan amount: $350,000. Rate: 6.25%. Term: 360 months. The monthly rate is 0.0625 Ć· 12 = 0.0052083. The standard payment formula is P Ć r Ć· (1 ā (1 + r)ān), which gives a principal and interest payment of about $2,155.01.
- Total paid over 360 months: $2,155.01 Ć 360 ā $775,800
- Total interest: about $425,800
With $300 extra each month
Your payment toward the loan becomes $2,455.01. To find the payoff time, use n = āln(1 ā P Ć r Ć· payment) Ć· ln(1 + r). Here P Ć r = $1,822.92, and $1,822.92 Ć· $2,455.01 = 0.7425. Then n = āln(0.2575) Ć· ln(1.0052083) ā 261 months, or about 21 years and 9 months.
- Time saved: roughly 99 months, about 8 years and 3 months
- Total interest: about $291,000
- Interest saved: roughly $135,000 for $300 a month
Figures are rounded, and you can check them in any amortization calculator with the same inputs.
Timing of a one-time $5,000
Now suppose you make no monthly extra and instead drop in a single $5,000 payment. After 36 months, the balance on this loan is about $336,900. A $5,000 principal payment then shortens the loan by about 12 months and saves roughly $21,000 in interest. Make the same $5,000 payment at month 180 and it shortens the loan by only about 6 months, saving roughly $7,600. The same dollars do about three times the work early, because they spare more future months of interest.
Your results will move with your actual rate, balance, and remaining term. Use this as a method, not a promise.
Duane Buziak Teaches How to Make a Principal Only Payment the Right Way
A correct submission takes a few minutes and prevents most misapplication problems.
- Find the right field. Most servicer portals have an “additional principal” or “principal only” box next to the regular payment. Use it.
- Pay the regular installment first. Make your scheduled payment, then send the extra amount as a separate transaction. Combining them in one lump invites the servicer to treat it as an early installment.
- Use written instructions if there is no field. For a mailed check, write “principal only” and your loan number on the memo line and include a note. If you pay by phone, ask the representative to confirm the application and request that confirmation in writing.
- Verify on the next statement. Check the principal balance line and the payment history. The balance should drop by the regular principal portion plus your extra amount. If it does not, contact the servicer promptly and ask them to reapply it.
Check for prepayment penalties
Most conforming loans do not carry a prepayment penalty, but do not rely on that. Read your note and your Closing Disclosure. The CFPB explains what a prepayment penalty is and how to find out whether your loan has one. If one exists, ask how much extra you can pay each year before it applies.
Be cautious with biweekly and third-party services
Some biweekly programs and payment-processing services charge setup or per-transaction fees, and some hold your money before sending it to the servicer. You can usually get the same result for free by adding one-twelfth of a payment to each monthly payment, or making one extra principal payment a year, directly with your servicer. Compare before you pay anyone for a service you can do yourself.
Principal Only Payment vs. Recast vs. Refinance: Comparing Your Options
Extra principal is one lever. A recast and a refinance are others, and they behave very differently.
| Option | Effect on monthly payment | Effect on term | Typical cost | Best fit |
|---|---|---|---|---|
| Extra principal payments | No change | Shortens the payoff date | None, unless the note has a prepayment penalty | Borrowers who want flexibility and a lower total interest bill |
| Recast | Lowers the payment after a lump sum | Keeps the original maturity date | Servicer fee and a minimum lump sum; both vary | Borrowers who received a windfall and want lower monthly obligations |
| Refinance | Can lower or raise it, depending on rate and term | Resets the term, or shortens it if you choose a shorter one | Closing costs; some borrowers choose no-out-of-pocket closing options | Borrowers whose rate can drop meaningfully, or who need a different loan structure |
| Keep the payment as is | No change | No change | None | Borrowers who need cash on hand or have better uses for it |
A recast means the servicer re-amortizes your remaining balance over the remaining term after you make a large principal payment. That lowers your payment without a new loan. Many conventional servicers offer it, subject to their own minimums and fees. FHA and VA loans are generally not eligible, so verify with your servicer before planning around one.
A refinance replaces your loan. It brings closing costs and resets the clock, but it can make sense when market rates fall below yours. That is where the Rate Hawk approach applies: We Don’t Just Look. We Hunt. Watch. Compare. Save. Tracking rates against your current note shows whether a new loan beats simply paying down the old one. A lower rate is not guaranteed, and the comparison should include costs, not only the rate.
Duane Buziak Says Check These Before Sending Extra Principal
This is general guidance, not personalized advice. A common order of priority for spare cash:
- An emergency fund covering several months of expenses
- High-interest debt, such as credit cards
- An employer retirement match, if you are not already capturing it
- Extra mortgage principal
Opportunity cost
Paying down a mortgage earns you a guaranteed return equal to your loan rate, because you stop paying interest at that rate. Compare it with what your cash could earn elsewhere and what your other debts cost. If a credit card charges far more than your mortgage, the card comes first. If your mortgage rate is higher than what safe savings pay, extra principal looks stronger. Treat it as a comparison, not a rule.
PMI
On a conventional loan with private mortgage insurance, extra principal can get you to the 80% loan-to-value point sooner. Under the Homeowners Protection Act, you can request cancellation at 80% of the home’s original value if you meet the conditions, and the servicer must automatically terminate PMI when the balance is scheduled to reach 78% of the original value. The CFPB explains how to ask your lender to cancel PMI. Ask your servicer how they calculate it, since extra payments do not move the original schedule that triggers the automatic date.
FHA mortgage insurance
FHA mortgage insurance rules differ by down payment and case date, and for many loans it does not cancel the way conventional PMI does. Review your loan documents and HUD’s FHA loan information before assuming extra principal will end it.
Liquidity
Money in your home is hard to get back out quickly. You can borrow against equity, but that requires qualifying and costs time and fees. Make sure your reserves are in place first.
Who Benefits Most From Principal Only Payments in 2026
Three borrower profiles tend to get the most from this strategy:
- Early-stage borrowers with a higher-rate loan who cannot yet refinance. Suppose a buyer in Charlotte, NC bought a $425,000 home recently and the rate is above where they would like. Extra principal early hits the heaviest interest months.
- Borrowers with irregular income. Imagine a Tampa, FL sales professional with a quarterly bonus. Sending a portion of each bonus as a separate principal payment adds flexibility, with no obligation to repeat it if income dips.
- Borrowers with a target date. Consider a couple in Maryland aiming to be mortgage-free before retirement. A fixed monthly extra amount can be sized to hit that date, and the same logic works on a $250,000 loan in Knoxville, TN or a larger balance in Washington, DC, Atlanta, GA, or South Carolina.
These are illustrations, and what fits depends on your rate, balance, reserves, and goals. Duane Buziak can run a payoff comparison and a refinance comparison side by side so you can see which path fits. Start with a free no-touch credit check, which does not affect your score, and expect a same-day return call.
Extra principal is one lever and a lower rate is another. The hunt means watching your options, comparing them with real numbers, and moving when one clearly wins.
Sending Extra Principal Correctly and Knowing When Not To
A principal only payment is a simple, low-cost way to cut interest, provided you submit it correctly, confirm it posted, and keep it in line with your emergency fund, other debts, and goals. If you are weighing it against a refinance, the right answer depends on your numbers, not a rule of thumb.
Call Duane Buziak at Mortgage Rate Hawk by Duane Buziak at 804-212-8663 for a side-by-side payoff versus refinance comparison. Your dream home is waiting, so don’t let the mortgage process hold you back. Get your free rate comparison and personalized loan match today, with same-day expert guidance to help you find the right path forward, whether you’re a first-time buyer or ready to refinance.
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