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There are various types of mortgages offered to borrowers along with various repayment plans. These repayment plans are calculated as equated monthly installments that borrowers are required to pay towards their loan. These payments are calculated by considering terms of mortgage, based on time period of mortgage loan and rate of interest. Borrowers also have an option to make extra payment every month towards the principal of the mortgage. Most mortgage companies allow this option, however, they may charge a fee to manage an account that is making an extra payment.

Borrowers turn to extra mortgage payments option as it allows them to pay off their mortgage before expiry of its term. Another advantage of extra mortgage payments is that it enables borrowers to build their equity faster. This is possible as supplementary payments are being made towards repayment of mortgage. Borrowers must go through their mortgage contract in detail to see whether the lender has placed any restriction on making such extra payments towards the principal. Usually, there are no such restrictions, as mortgage lenders find it in their interest to get their money back sooner than expected. Borrowers can therefore, add some extra amount to their usual monthly installments without actually opting for bi-weekly or bi-monthly programs. These programs usually attract a fee, which borrowers can save by choosing extra payments option.

Extra mortgage payment reduces the principal. As borrowers continue to make extra payments, the interest charge is lowered as principal is now reduced. If this process continues over the years, then it produces a snowballing effect that allows borrowers to pay off their mortgages early and save on interest charges.

Some lenders allow their customers an option to add extra payments towards the principal in the coupons that borrowers enclose with payments. Borrowers can always approach their respective mortgage lender in case they do not have this option mentioned in repayment coupons.