Lump-Sum Mortgage Principal Payment

Bonus, inheritance, house sale leftovers — you have a one-time pile of cash and you are staring at the mortgage. A lump-sum principal payment hits the balance once. Unlike a recurring extra monthly payment, it is a single strike. In most cases the required monthly bill does not change unless you also recast or refinance. Compare outcomes in the recast vs refinance vs extra payment calculator.

$25,000 against a $280,000 balance

Suppose $280,000 remains at an example 7% note rate with 300 months left. A $25,000 principal payment drops the balance to $255,000. Without a recast, required P&I stays near the original amount and the schedule shortens — more of each later payment goes to principal because interest is charged on less. With a recast modeled at the same rate and remaining term, required P&I falls and the term length stays aligned with those original remaining months. Illustrations only, not quotes.

Why the monthly bill often stays put

Servicers apply the money to principal; interest going forward is calculated on the smaller balance. The scheduled installment often does not change, so you finish earlier rather than paying less each month. If you want the required payment itself to drop after the lump sum, ask about a recast — when your loan allows it.

Before you wire the money

• Tell the servicer in writing that the funds are for principal, not prepaid installments.
• Ask whether a partial-payment or recast fee applies.
• Weigh keeping cash for reserves or other debts. Avoiding future interest at your note rate is not the same as a guaranteed investment return — same caution as with extra monthly payments.

For recurring extras instead of a single lump sum, use the extra payment calculator. For schedule detail, use the amortization calculator.