When a lump sum makes sense
A bonus, tax refund or inheritance can be applied to principal in a single payment. The earlier you make it, the more interest it avoids, because the removed principal would have accrued interest for the rest of the term.
Example
On a $300,000 30-year loan at 6.5% APR, a one-time $20,000 payment in month 12 shortens the loan to about 25 years 2 months, roughly 4 years 10 months early, and saves about $91,600 in interest. The regular payment stays $1,896.20 unless you ask the lender to recast the loan.
Recasting versus paying extra
After a large payment, some lenders offer a recast: the monthly payment is recalculated on the lower balance for the same end date. That lowers the monthly bill but not the payoff date. Keeping the payment unchanged, as this calculator assumes, shortens the term instead.
Compare with monthly extra payments.