How amortization works
Each payment covers the interest owed that month, and the rest reduces the balance. Early on most of the payment is interest; by the end, almost all of it is principal.
Example
A $280,000 loan at 6.75% over 30 years has a payment of about $1,816. Without extra payments, only about $3,000 of the first year's payments goes to principal. Adding $200 a month pays the loan off in 22 years and 7 months and saves roughly $107,600 in interest.
Extra payments on rentals
Paying down a rental mortgage early raises cash flow later, but it ties up cash you could use for the next deal. Compare the interest rate with the return you'd expect elsewhere.
Common questions
Do extra payments always go to principal?
Usually, but confirm with your servicer and check that your loan has no prepayment penalty.
Can I use this for any loan?
Yes, it works for any fixed-rate, fully amortizing loan.