Are extra payments deducted directly from principal?

[Mark Hu]

I've read that when you pay above your normal mortgage payment each month, the extra amount is deducted directly from principal. Is this true, and do all lending institutions follow this?

[Lucas S.]

All banks should do this, but not all do. I had a loan with a major bank and if I made a larger than required payment they did put the extra to principal by default. However if I made an extra payment (more than one payment a month) they defaulted it to be the next payment due (interest/principal) rather than just principal. Wasn't a big deal as i could just specify principal only with the payment, but the point is that they didn't default to that.

Just check with your bank on how to make sure it is designated correctly.