How does making additional payments on a mortgage affect the overall loan?

Making additional payments on a mortgage can significantly affect the overall loan, particularly in reducing both the principal balance and the total interest paid over the life of the loan. When you make extra payments, those funds typically go directly toward the principal amount of the loan, effectively reducing the outstanding balance more quickly than scheduled. As the principal decreases, the interest charges—calculated on the reduced balance—also decrease over time.

This results in a lower total interest expenditure since interest is computed on the principal. Consequently, not only can this lead to shorter loan terms, as your loan is paid off sooner, but it also means you'll pay less in total interest compared to sticking strictly to the scheduled payments. Thus, making additional payments can be a strategically sound financial decision for borrowers looking to minimize their long-term cost of borrowing.