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How to Lower a Mortgage Principal

how to get a mortgage in principal

Making one extra payment each year will save you thousands in interest.

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Pay It Down

Step 1

Divide the amount of your mortgage payment in half. For example, half of a $1,342 monthly payment rounds up to $672.

Step 2

Pay $672 to your mortgage company every other week instead of paying $1,342 once a month. This will have the effect of making one extra payment, all towards the principal, each year. It will reduce your principal by $1,367 yearly, saving you $42,055 in interest over the term of the loan.

Read your mortgage contract to see if your lender accepts principal payments annually on the anniversary of your loan. If so, find what percentage the company will allow. It may be anywhere from 10 percent up to 25 percent of the principal balance.


a savings account earmarked for extra money that is to go toward your annual principal payment. Each month deposit one-twelfth of the percentage amount your mortgage company will accept. For example, if your principal is currently $200,000 and you can pay 10 percent annually, you'll want to set aside about $1,667 each month to pay $20,000 on your mortgage anniversary date.

Lenders' Programs

Step 1

Determine if you meet the criteria for a principal reduction program, or PRP. They include owing more on your home than it is worth, being current on mortgage payments, living in the home you owe the mortgage on, having a credit score of at least 500 and qualifying for a refinance.

Apply for an SRP or PRP with your lender or make application with a new lender if your current company doesn't have PRP options.

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