My parents taught me something in 1985 that I still think about today.
They bought their property in 1978 for $30,000. A modest home. A simple life. But they had a strategy that would save them tens of thousands of dollars.
Their mortgage payment was $550 a month — but only about $150 of that was going to principal. The other $400 was interest.
They didn't just accept it. They fought it. One check at a time.
The Strategy That Worked
Here's what they did, month after month:
| Step | Action | Amount |
|---|---|---|
| 1 | Regular monthly payment | $550 |
| 2 | Of that, $150 went to principal | $150 |
| 3 | They wrote a separate check for the next month's principal | $150 |
| 4 | That check was marked: "Pay to the order of principal" | $150 |
Total paid each month: $700
Total going to principal each month: $300 ($150 from regular payment + $150 extra)
Total going to interest: $400 (unchanged)
What That Actually Means
| Payment | Goes To | Amount |
|---|---|---|
| Regular $550 | Interest | $400 |
| Regular $550 | Principal | $150 |
| Extra Check | Principal | $150 |
| Total | Principal | $300 |
They were paying $700 total — but $300 of that went straight to principal, cutting their loan balance in half as fast as possible.
Wait — Does This Mean They Skipped Paying Interest?
No — and this is the part most people get wrong.
When they paid that extra $150, they didn't pay the next month's interest early. They reduced the balance that the next month's interest would be calculated on.
Here's how it works:
- Interest is calculated monthly based on your current outstanding principal balance
- When you make an extra principal payment, you're permanently reducing the balance that the lender uses to calculate interest for all future months
- It doesn't "pre-pay" or replace a future payment — it makes every future payment cheaper
Their regular $550 payment already covered the interest for that month. The extra $150 went straight to principal, reducing their loan balance forever.
Why This Worked
The key was the extra check — written separately, marked clearly, and sent with a letter:
"Please apply this $150 to my principal balance. This is NOT a payment for next month. This is extra principal only."
They did this every single month.
Why the separate check matters: If you just send a larger payment without specifying, some lenders will apply the extra amount to next month's payment instead of principal. That saves you nothing — you still pay the same interest. The separate check and letter ensure it goes exactly where it needs to go.
The Results on a $30,000 Home
Here's what that extra $150/month did to their $30,000 mortgage:
| Timeline | What Happened |
|---|---|
| 1978 | Bought home for $30,000 |
| 1985 | Started the extra principal strategy |
| 1986 | 12 extra payments = $1,800 extra toward principal |
| 1987 | 24 extra payments = $3,600 extra toward principal |
| 1990 | They were 5 years ahead on principal |
| 1995 | They paid off their house 6 years early |
They didn't pay more than they could afford. They just redirected the next month's principal payment toward the current month's principal. Slow and steady.
The Snowball Effect Over Time
In the first month, their regular $550 payment was mostly interest ($400) and a small amount of principal ($150). But their extra $150 payment went straight to principal. Every month they did this, they were accelerating the process.
Here's what that looks like:
| Timeline | Regular Monthly Principal | Extra Principal | Total Principal |
|---|---|---|---|
| Month 1 | $150 | $150 | $300 |
| Month 12 | $160 | $150 | $310 |
| Month 24 | $175 | $150 | $325 |
| Month 60 | $220 | $150 | $370 |
By year 5, they were paying $370 in principal each month instead of $220 — all because they kept adding that extra $150. The snowball was rolling.
The Impact on Their Total Interest
Here's the real number that matters:
| Scenario | Total Interest Paid | Years to Pay Off |
|---|---|---|
| Regular $550/month only | ~$150,000 | 30 years |
| With $150 extra principal/month | ~$80,000 | ~24 years |
Savings: ~$70,000 and 6 years early
On a $30,000 home, they saved more than double the purchase price in interest — just by adding $150 a month to principal.
Mom's Rules
- Always make your regular payment first
- Write the extra check separately
- Mark it clearly: "Pay to the order of principal"
- Include a cover letter with your account number
- Keep a copy of everything
- Check your next statement — the principal balance should drop
Why Most People Don't Do This
Banks don't advertise this strategy. In fact, some mortgage servicers will apply extra payments to next month's payment instead of principal unless you specify. This is why the separate check and cover letter are so important.
The CFPB confirms: When you make an extra payment, you must explicitly tell your lender to apply it to the principal. If you don't, they might put it toward your next month's bill (which includes interest) instead of reducing your principal balance, which defeats the purpose.
What I'm Doing Now
My parents' lesson from 1985 is exactly why I'm building MegaFish. Small, consistent actions compound into big results.
- $150 extra to principal on a $30,000 home = 6 years early mortgage payoff and $70,000 saved
- One blog post a day = 63 posts in 63 days
- One inch a day = 36.5 feet a year
🐟 Ready to start your own side project? I build dating sites, blogs, and web apps — Flask, SQLite, Ubuntu, Cloudflare. Starting at $500.
"Slow and steady wins the race. Move an inch every day."
— Jimmy Presnell