How accelerated repayment saves interest
Mortgage interest accrues daily based on the remaining principal balance. Each extra payment reduces that balance immediately, which means fewer days of interest compound on the outstanding amount. A $200 monthly increase on a 30-year mortgage might cut 7 years off the loan while saving over $80,000 in interest.
The math compounds over time. Early extra payments have the largest impact because they eliminate a bigger portion of the principal, and that eliminated amount never generates interest. Later extra payments still reduce the payoff schedule, but by smaller absolute amounts.
Strategic timing and flexibility
Not every extra dollar needs to come from the monthly budget. Lump-sum payments like tax refunds or bonuses can be applied directly to principal. Some borrowers pay biweekly instead of monthly, which creates an extra payment per year.
The key constraint is ensuring the lender applies extra money to principal, not to next month's interest. Most mortgage servicers allow this with a simple notation on the payment.