How to make extra payments on a home loan to reduce only the principal?
Extra payments on a mortgage are payments made in addition to the regular monthly installment. For example, if your normal monthly payment is 10,000 baht, but you pay 11,000 baht, the extra 1,000 baht is often considered an extra payment. This can be paid as a lump sum with your regular installment or separately, depending on the bank's terms and conditions.
Therefore, if you're going to make extra payments on your mortgage, you should do it as efficiently as possible. Regular mortgage payments cover both interest and principal, with a significant portion going towards interest. For instance, a 10,000 baht payment only reduces the outstanding loan balance by 4,000-6,000 baht.
Because regular payments don't significantly reduce the principal, those who choose to make extra payments want the money to go towards principal reduction, thus speeding up the debt repayment process. Here are the details and conditions for extra payments on a mortgage that only reduce the principal, varying by bank:
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1. Kasikorn Bank
To ensure the extra payment only reduces the principal, it must be paid as a lump sum with your regular monthly installment. However, payments must be made 1-2 days in advance of the due date; otherwise, the extra payment will go towards interest before reducing the principal. Payments can be made at bank counters or via online banking, but must be completed before 9:00 PM. Banks operate every day except for bank counters which are closed on bank holidays.
Example: If your due date is the 30th and you want to make an extra payment of 5,000 baht, you must pay 15,000 baht by the 28th-29th. The extra 5,000 baht will go entirely towards reducing the principal.
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2. Krungsri Bank
If you want the extra payment to only reduce the principal, you can pay at the bank counter on your loan due date or, if paying via automatic debit, make an additional payment via online banking. However, this must be done after the regular installment has been paid and on the same day.
Bank payments are processed only on business days, excluding Saturdays, Sundays, and public holidays. Therefore, if the due date falls on a holiday, such as a Saturday, the bank will move the due date forward to Friday.
Example: If the due date is the 30th and the amount is 10,000 baht, and you want to make an extra payment of 5,000 baht, you must do so by the 30th. You must pay the regular installment first before making the additional 5,000 baht payment.
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3. Krung Thai Bank
If you want the extra payment to only reduce the principal, you must pay it as a lump sum with your regular installment, and it must be paid one day in advance of the due date. Otherwise, the extra payment will go towards interest before reducing the principal. Payments can be made at bank counters or via online banking, between 4:00 AM and 10:00 PM. Due dates can be agreed upon.
Example: If your due date is the 30th and you want to make an extra 5,000 baht, you must pay 15,000 baht by the 29th. The extra 5,000 baht will go towards reducing the principal.
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4. Government Housing Bank (GHB)
Payments can be made on any day of the month. The first payment will initially cover the interest for that billing cycle, and after the interest is paid in full, subsequent payments will go towards the principal. You can make as many payments as you like within that billing cycle. Because banks only calculate interest once a month.
Example 1: The monthly loan payment is 10,000 baht, consisting of 4,000 baht in interest and 6,000 baht in principal. If the first payment is the full 10,000 baht, and the second payment is an additional 5,000 baht, the 5,000 baht will be considered a lump sum payment that reduces the entire principal.
Example 2: The monthly loan payment is 10,000 baht, consisting of 4,000 baht in interest and 6,000 baht in principal. If the first payment is only 5,000 baht, it will go towards 4,000 baht in interest and 1,000 baht in principal. If the second payment has additional funds and you want to pay 6,000 baht, this payment will be a lump sum payment that reduces the entire principal.
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5. Government Savings Bank
Lump sum payments must be made at the bank counter only. The loan agreement will determine whether the payment goes towards principal or interest first. Lump sum payments can be made via online banking, but the system will always deduct the interest first.
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6. TTMB Thanachart Bank (TTB)
If you want the extra payment to only reduce the principal, you can pay at the bank counter when your loan is due, or if you prefer automatic account deduction, you can make an additional payment via online banking. However, this must be done after paying your regular installment and on the same day.
Bank payments are processed only on business days, excluding weekends and public holidays. Therefore, if your due date falls on a holiday (e.g., Saturday), the bank will move the due date forward to Friday.
Example: If your due date is the 30th and you want to make an extra payment of 5,000 baht, you must make the extra payment by the 30th, paying your regular installment first.
**Making an extra payment via online banking beforehand is not recommended as it may result in a duplicate deduction.** The due date is the 30th for 10,000 baht. A payment of 15,000 baht was made on the 28th (this deducts interest before principal). The system will then deduct another 10,000 baht on the 30th, which is the due date.
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7. Siam Commercial Bank
Payments can be made at bank counters, automatically deducted from an account, and additional extra payments can be made via online banking. However, automatic payments are not real-time, so the extra payment will initially deduct interest. If the extra payment covers the interest, the remaining amount and the automatic deduction will reduce the principal entirely. In simple terms, it's the same as a regular payment with the extra payment reducing the principal. Many people might be surprised to see that the extra payment deducts interest first. The extra payment must be made on the same day as the due date.
Example: The due date is the 30th, so the extra payment must be made on the 30th. Pay the regular installment first, then make the extra payment. Assuming the monthly loan payment is 10,000 baht, consisting of 4,000 baht in interest and 6,000 baht in principal, if you make an extra payment of 5,000 baht, the 5,000 baht will first go towards 4,000 baht in interest and 1,000 baht in principal. After that, the bank will calculate the normal payment of 10,000 baht, which will reduce the entire principal.
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8. CIMB Thai Bank (CIMB)
Extra payments cannot only reduce the principal; they must always reduce the interest first. This is because the statement closing date does not match the due date, resulting in interest accruing during that period. However, it will help reduce interest in the next payment cycle.
Example: The monthly loan payment is 10,000 baht, consisting of 4,000 baht in interest and 6,000 baht in principal. If you want to make an extra payment of 5,000 baht, it will go towards 1,000 baht in interest and 4,000 baht in principal. After that, when the next payment due date arrives... From the 10,000 baht due, 3,000 baht will be interest and 7,000 baht will be principal.
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9. UOB Bank
If you want the extra payment to reduce only the principal, you can make a lump-sum payment after paying your regular loan balance on the same day, or pay in advance before the due date. However, if you want to pay in advance, you must pay 1-2 days before the due date and it must be a single lump sum combined with your regular payment.
Example: The due date is the 30th for 10,000 baht. If you want to make a 5,000 baht lump-sum payment, you must pay it after the regular payment is deducted and by the 30th. Or, if you want to make an advance payment, you must pay 15,000 baht by the 28th-29th (one-time payment, not split). The extra 5,000 baht paid will go entirely towards reducing the principal.
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