Worked example: one $10,000 extra payment
Assume a $250,000 loan, a 6.50% nominal annual rate, monthly payments, and a 30-year term. The regular principal-and-interest payment is $1,580.17. After payment 12, an additional $10,000 is applied directly to principal.
| Result | Original schedule | With $10,000 extra |
|---|---|---|
| Regular monthly payment | $1,580.17 | $1,580.17 |
| Balance after payment 12 | $247,205.69 | $237,205.69 |
| Interest in payment 13 | $1,339.03 | $1,284.86 |
| Total interest | $318,861.22 | $269,588.24 |
| Estimated payoff | 360 months | 323 months |
Illustration assumes monthly compounding, payments made as scheduled, and the extra amount posted to principal immediately after payment 12. Actual lender rules and rounding may differ.
How the next row changes
Without the extra payment, payment 13 begins with a $247,205.69 balance and produces approximately $1,339.03 of interest. With the extra payment, the starting balance is $237,205.69 and the next interest amount falls to about $1,284.86.
The difference is not limited to one row. Every later row starts from a lower balance, so the interest portion is repeatedly recalculated.
One-time versus recurring extra payments
A one-time principal payment is entered on a specific date. A recurring extra amount is added to every scheduled payment. Both approaches can shorten payoff, but the recurring approach changes more rows and may produce a larger cumulative effect.
For irregular payment histories, use software that lets you edit the actual payment date and amount rather than forcing one identical monthly extra.
Checklist before trusting the revised schedule
- Confirm the lender applies the additional amount to principal.
- Use the correct posting date, not merely the date the payment was mailed.
- Keep the regular payment unchanged unless the loan is formally recast.
- Compare total interest, payoff date, and the balance on the row after the extra payment.
- Save both the original and revised schedules for comparison.
Also compare this strategy with a biweekly or accelerated payment schedule.
Build and compare the schedule
Use the free amortization calculator for a standard schedule. Use the registered Windows amortization software when you need to edit individual dates, payments, rates, or notes and save the revised loan.