Answer
Mortgages are typically paid through monthly installments sent to your lender or loan servicer, often via automatic bank drafts, online payments, or mailed checks. Each payment is applied first to interest due, then to principal, and sometimes to escrow for property taxes and homeowners insurance.
Where your monthly payment goes
- Interest: the cost of borrowing-this portion is usually larger early in the loan.
- Principal: reduces your loan balance and builds equity over time.
- Escrow (if applicable): money set aside by your servicer to pay property taxes and homeowners insurance when due.
Over time, your payments gradually pay down the mortgage according to an amortization schedule, meaning the share going to principal typically increases as the balance declines.
Paying extra toward principal (and why the wording matters)
If you pay extra toward principal, you generally want it to reduce your balance-not just “prepay” next month’s payment. That’s why it helps to designate the extra amount as an additional principal payment so it reduces the loan balance rather than advancing your due date.
Practical tip: When making an extra payment, look for a checkbox or dropdown like “Apply to principal” in your servicer’s portal, or include clear instructions if you mail a check.
See the payoff impact in seconds
Want to see how each payment affects your balance-and how extra principal changes your payoff date? Use our mortgage payment calculator to view an amortization breakdown and model extra payments.