Extra payments, without the folklore

AmortSheet lets you model two kinds of extras: a repeating monthly amount, and one-time lump sums tied to a payment number (bonus, tax refund, gift). Both hit principal after that month’s scheduled interest is taken. Neither is tax, legal, or lender advice.

What actually counts as extra

Extra means principal curtailment. Paying the escrow shortage, buying discount points at closing, or sending the regular draft a week early is not extra principal. On the coupon or the online portal, look for language like “apply to principal” or “principal only.” If the servicer is vague, ask them to confirm in writing that the amount will not sit in suspense.

Monthly habit vs. one-time lump

A monthly extra is a smaller payment that compounds because it lands every cycle. A lump sum is a one-time drop in the balance. For the same total dollars, earlier is better — so $6,000 in month 1 beats $200 a month for 30 months, which beats $6,000 in year 10.

In practice, people keep extras they can automate. If a $150 monthly ACH is the payment you will actually send, model that. Use the lump-sum row for money you already have: a refund, an RSU vest, a family gift.

What extra payments do not do

• They do not automatically lower the required monthly P&I.
• They do not skip future payments unless the servicer agrees to a recast or you pay the loan off.
• They do not change your rate.
• They do not replace an emergency fund. A mortgage at 6% is cheaper than a credit card at 24%.

Recast vs. prepay

A recast (available on many conventional loans, rarely on FHA/VA) keeps the same rate and remaining term but recomputes the monthly P&I on the new, lower balance. You pay extra, then ask the servicer to shrink the bill. Prepaying without a recast keeps the bill the same and pulls in the payoff date. AmortSheet models the second path — the default at most servicers.

When not to send extra principal

• Prepayment penalty. Uncommon on modern qualified mortgages, still present on some portfolio and non-QM notes. Read the note.
• High-interest consumer debt. Extra on a 6.5% mortgage while carrying 19% cards is backwards.
• Unfunded match or high-fee cash needs. A 401(k) match is an immediate return extra principal cannot beat.
• A rate you can refinance cheaply. If you are 90 days from a planned refinance, extras still help, but the interest-saved figure on a 28-year remaining schedule overstates the benefit.

A worked example

Take $350,000 at 6.5% for 30 years. Scheduled P&I is about $2,212. Over the full term you would pay roughly $446,000 in interest. Add $200 extra every month and the loan finishes years earlier; interest drops by a six-figure amount. Put a $10,000 lump on payment 1 and the first-year interest slice shrinks immediately because the balance never sees that $10,000 again.

Run those two cases on the calculator, export the CSV, and compare the payoff line to your own budget. Then readbiweekly vs monthly if the extra you want is “half a payment every two weeks.”