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Most mortgages issued in the US are due on the first of each month, are amortized monthly and carry a grace period of 14 days. Payments on these mortgages could be received by the mortgagee all the way through the 15th of the month, yet they must be credited, as if they were received on the first - no late fees charged and no additional interest accrued.

Most US mortgages also specify no prepayment penalty and may be repaid in part or in full by the borrower at any time. Any extra payment must be designated as additional principal repayment, or else the bank may not properly credit it. For example, they may choose to treat an extra payment as prepayment of future months payments and this is almost never what you would want as a borrower.

To prepay principal on a mortgage with a 14 day grace period and no prepayment penalty, it benefits the borrower most to include the additional principal prepayment amount with the regular payment and wire it to the mortgage holder in the morning of the last workday prior to and including the 15th of the month. The entire payment will then have to be credited by the mortgagee, as if it had been received on the 1st. (Keep in mind that banks can't send and receive wires on weekends and bank holidays and that the payment must generally reach your mortgagee before 2PM their time to be credited on the same day.)

Mortgage loan payoffs differ from loan prepayments in several ways. Most importantly, for payoffs, interest on the outstanding principal balance is calculated through the actual day your payment is received. What this means is that in many cases, someone paying off their mortgage would benefit by first paying it down to near zero on the 15th and then paying it off completely the following month.

For example, a $150,000 principal balance 6% annual rate monthly amortized mortgage with a 14 day grace period, no prepayment penalty and no escrow and PMI provisions would cost the borrower over $370 more in interest to pay off on the 15th of the month than to pay down to $1 on the same day and then payoff a month later. Loans with escrow and mortgage insurance provisions will experience slightly reduced (generally negligible) overall savings.