Power of Pre-Payments

Adding $100 to your monthly mortgage payment

Remember that at any point of time you are paying the interest on the current balance of mortgage. This is called the principal. So if you reduce this principal, you would pay less interest. Almost all mortgage products let you 1) increase your monthly payments by 15%-20% or 2) pay lump sum of 15%-20% of your balance of mortgage per year. In the case that the interest rate is not changing, paying the lower interest means shortening the amortization.
Amortization is number of years it takes until you pay off a mortgage.
In a real example below it shows your saving. This is considering you can save $100 per month. If you use the $100 to pay toward the principal of your mortgage by increasing your monthly mortgage payment, your amortization will decrease from 30 years to 26.5 years. Almost 4 years earlier you pay off your mortgage.
Balance of Mortgage: $300,000
Initial Amortization: 30 years
Rate: 5 years fix 3.6%
Monthly payment: $1,359
Monthly Payment: $1,459 (increase by $100)
Amortization: 26.5 Years