The Mortgage Amortization Calculator provides an annual or monthly amortization schedule of a mortgage loan. It also calculates the monthly payment amount and determines the portion of one's payment going to interest. Having such knowledge gives the borrower a better idea of how each payment affects a loan. It also shows how fast the overall debt falls at a given time.
Monthly Pay: $2,555.16
Monthly
Total
Mortgage Payment
$2,555.16
$919,858.93
Property Tax
$500.00
$180,000.00
Home Insurance
$208.33
$75,000.00
Other Costs
$416.67
$150,000.00
Total Out-of-Pocket
$3,680.16
$1,324,858.93
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$919,858.93
Total Interest
$519,858.93
Mortgage Payoff Date
Mar. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
03/2025
$2,201
$354
$399,646
2
4/2025
$2,199
$356
$399,289
3
5/2025
$2,197
$358
$398,931
4
6/2025
$2,195
$360
$398,570
5
7/2025
$2,193
$362
$398,208
6
8/2025
$2,191
$364
$397,844
7
9/2025
$2,189
$366
$397,477
8
10/2025
$2,187
$368
$397,109
9
11/2025
$2,185
$370
$396,738
10
12/2025
$2,183
$372
$396,366
11
1/2026
$2,181
$374
$395,991
12
2/2026
$2,179
$377
$395,615
End of year 1
13
3/2026
$2,177
$379
$395,236
14
4/2026
$2,174
$381
$394,856
15
5/2026
$2,172
$383
$394,473
16
6/2026
$2,170
$385
$394,088
17
7/2026
$2,168
$387
$393,701
18
8/2026
$2,166
$389
$393,312
19
9/2026
$2,164
$391
$392,920
20
10/2026
$2,162
$393
$392,527
21
11/2026
$2,160
$396
$392,131
22
12/2026
$2,157
$398
$391,734
23
1/2027
$2,155
$400
$391,334
24
2/2027
$2,153
$402
$390,931
End of year 2
25
3/2027
$2,151
$404
$390,527
26
4/2027
$2,149
$407
$390,120
27
5/2027
$2,146
$409
$389,712
28
6/2027
$2,144
$411
$389,300
29
7/2027
$2,142
$413
$388,887
30
8/2027
$2,140
$416
$388,471
31
9/2027
$2,137
$418
$388,054
32
10/2027
$2,135
$420
$387,633
33
11/2027
$2,133
$423
$387,211
34
12/2027
$2,130
$425
$386,786
35
1/2028
$2,128
$427
$386,359
36
2/2028
$2,126
$430
$385,929
End of year 3
37
3/2028
$2,123
$432
$385,497
38
4/2028
$2,121
$434
$385,063
39
5/2028
$2,118
$437
$384,626
40
6/2028
$2,116
$439
$384,187
41
7/2028
$2,114
$441
$383,746
42
8/2028
$2,111
$444
$383,302
43
9/2028
$2,109
$446
$382,855
44
10/2028
$2,106
$449
$382,407
45
11/2028
$2,104
$451
$381,955
46
12/2028
$2,101
$454
$381,502
47
1/2029
$2,099
$456
$381,045
48
2/2029
$2,096
$459
$380,587
End of year 4
49
3/2029
$2,094
$461
$380,125
50
4/2029
$2,091
$464
$379,661
51
5/2029
$2,089
$466
$379,195
52
6/2029
$2,086
$469
$378,726
53
7/2029
$2,084
$472
$378,254
54
8/2029
$2,081
$474
$377,780
55
9/2029
$2,078
$477
$377,304
56
10/2029
$2,076
$479
$376,824
57
11/2029
$2,073
$482
$376,342
58
12/2029
$2,071
$485
$375,858
59
1/2030
$2,068
$487
$375,370
60
2/2030
$2,065
$490
$374,880
End of year 5
61
3/2030
$2,062
$493
$374,388
62
4/2030
$2,060
$495
$373,892
63
5/2030
$2,057
$498
$373,394
64
6/2030
$2,054
$501
$372,893
65
7/2030
$2,052
$504
$372,390
66
8/2030
$2,049
$506
$371,883
67
9/2030
$2,046
$509
$371,374
68
10/2030
$2,043
$512
$370,862
69
11/2030
$2,040
$515
$370,347
70
12/2030
$2,038
$518
$369,830
71
1/2031
$2,035
$520
$369,309
72
2/2031
$2,032
$523
$368,786
End of year 6
73
3/2031
$2,029
$526
$368,259
74
4/2031
$2,026
$529
$367,730
75
5/2031
$2,023
$532
$367,198
76
6/2031
$2,020
$535
$366,663
77
7/2031
$2,017
$538
$366,125
78
8/2031
$2,014
$541
$365,585
79
9/2031
$2,011
$544
$365,041
80
10/2031
$2,008
$547
$364,494
81
11/2031
$2,005
$550
$363,944
82
12/2031
$2,002
$553
$363,391
83
1/2032
$1,999
$556
$362,835
84
2/2032
$1,996
$559
$362,276
End of year 7
85
3/2032
$1,993
$562
$361,714
86
4/2032
$1,990
$565
$361,149
87
5/2032
$1,987
$568
$360,581
88
6/2032
$1,984
$571
$360,010
89
7/2032
$1,981
$575
$359,435
90
8/2032
$1,977
$578
$358,857
91
9/2032
$1,974
$581
$358,276
92
10/2032
$1,971
$584
$357,692
93
11/2032
$1,968
$587
$357,105
94
12/2032
$1,965
$590
$356,515
95
1/2033
$1,961
$594
$355,921
96
2/2033
$1,958
$597
$355,324
End of year 8
97
3/2033
$1,955
$600
$354,724
98
4/2033
$1,952
$604
$354,120
99
5/2033
$1,948
$607
$353,513
100
6/2033
$1,945
$610
$352,903
101
7/2033
$1,942
$614
$352,289
102
8/2033
$1,938
$617
$351,672
103
9/2033
$1,935
$620
$351,052
104
10/2033
$1,931
$624
$350,428
105
11/2033
$1,928
$627
$349,801
106
12/2033
$1,924
$631
$349,170
107
1/2034
$1,921
$634
$348,536
108
2/2034
$1,918
$638
$347,898
End of year 9
109
3/2034
$1,914
$641
$347,257
110
4/2034
$1,910
$645
$346,613
111
5/2034
$1,907
$648
$345,964
112
6/2034
$1,903
$652
$345,313
113
7/2034
$1,900
$655
$344,657
114
8/2034
$1,896
$659
$343,998
115
9/2034
$1,893
$663
$343,336
116
10/2034
$1,889
$666
$342,669
117
11/2034
$1,885
$670
$342,000
118
12/2034
$1,882
$674
$341,326
119
1/2035
$1,878
$677
$340,649
120
2/2035
$1,874
$681
$339,968
End of year 10
121
3/2035
$1,870
$685
$339,283
122
4/2035
$1,867
$689
$338,594
123
5/2035
$1,863
$692
$337,902
124
6/2035
$1,859
$696
$337,206
125
7/2035
$1,855
$700
$336,506
126
8/2035
$1,851
$704
$335,802
127
9/2035
$1,847
$708
$335,094
128
10/2035
$1,844
$712
$334,383
129
11/2035
$1,840
$716
$333,667
130
12/2035
$1,836
$719
$332,948
131
1/2036
$1,832
$723
$332,224
132
2/2036
$1,828
$727
$331,497
End of year 11
133
3/2036
$1,824
$731
$330,766
134
4/2036
$1,820
$735
$330,030
135
5/2036
$1,816
$739
$329,291
136
6/2036
$1,812
$744
$328,547
137
7/2036
$1,808
$748
$327,800
138
8/2036
$1,803
$752
$327,048
139
9/2036
$1,799
$756
$326,292
140
10/2036
$1,795
$760
$325,532
141
11/2036
$1,791
$764
$324,768
142
12/2036
$1,787
$768
$324,000
143
1/2037
$1,783
$773
$323,227
144
2/2037
$1,778
$777
$322,450
End of year 12
145
3/2037
$1,774
$781
$321,669
146
4/2037
$1,770
$785
$320,883
147
5/2037
$1,765
$790
$320,094
148
6/2037
$1,761
$794
$319,300
149
7/2037
$1,757
$798
$318,501
150
8/2037
$1,752
$803
$317,698
151
9/2037
$1,748
$807
$316,891
152
10/2037
$1,743
$812
$316,079
153
11/2037
$1,739
$816
$315,263
154
12/2037
$1,734
$821
$314,442
155
1/2038
$1,730
$825
$313,617
156
2/2038
$1,725
$830
$312,787
End of year 13
157
3/2038
$1,721
$834
$311,953
158
4/2038
$1,716
$839
$311,114
159
5/2038
$1,712
$844
$310,271
160
6/2038
$1,707
$848
$309,422
161
7/2038
$1,702
$853
$308,570
162
8/2038
$1,698
$858
$307,712
163
9/2038
$1,693
$862
$306,850
164
10/2038
$1,688
$867
$305,983
165
11/2038
$1,683
$872
$305,111
166
12/2038
$1,679
$877
$304,235
167
1/2039
$1,674
$881
$303,353
168
2/2039
$1,669
$886
$302,467
End of year 14
169
3/2039
$1,664
$891
$301,576
170
4/2039
$1,659
$896
$300,680
171
5/2039
$1,654
$901
$299,779
172
6/2039
$1,649
$906
$298,873
173
7/2039
$1,644
$911
$297,962
174
8/2039
$1,639
$916
$297,046
175
9/2039
$1,634
$921
$296,125
176
10/2039
$1,629
$926
$295,199
177
11/2039
$1,624
$931
$294,268
178
12/2039
$1,619
$936
$293,332
179
1/2040
$1,614
$941
$292,391
180
2/2040
$1,609
$947
$291,444
End of year 15
181
3/2040
$1,603
$952
$290,493
182
4/2040
$1,598
$957
$289,536
183
5/2040
$1,593
$962
$288,573
184
6/2040
$1,588
$968
$287,606
185
7/2040
$1,582
$973
$286,633
186
8/2040
$1,577
$978
$285,655
187
9/2040
$1,572
$984
$284,671
188
10/2040
$1,566
$989
$283,682
189
11/2040
$1,561
$994
$282,688
190
12/2040
$1,555
$1,000
$281,688
191
1/2041
$1,550
$1,005
$280,682
192
2/2041
$1,544
$1,011
$279,672
End of year 16
193
3/2041
$1,539
$1,017
$278,655
194
4/2041
$1,533
$1,022
$277,633
195
5/2041
$1,527
$1,028
$276,605
196
6/2041
$1,522
$1,033
$275,572
197
7/2041
$1,516
$1,039
$274,533
198
8/2041
$1,510
$1,045
$273,488
199
9/2041
$1,505
$1,051
$272,437
200
10/2041
$1,499
$1,056
$271,381
201
11/2041
$1,493
$1,062
$270,319
202
12/2041
$1,487
$1,068
$269,251
203
1/2042
$1,481
$1,074
$268,177
204
2/2042
$1,475
$1,080
$267,098
End of year 17
205
3/2042
$1,469
$1,086
$266,012
206
4/2042
$1,464
$1,092
$264,920
207
5/2042
$1,458
$1,098
$263,823
208
6/2042
$1,451
$1,104
$262,719
209
7/2042
$1,445
$1,110
$261,609
210
8/2042
$1,439
$1,116
$260,493
211
9/2042
$1,433
$1,122
$259,371
212
10/2042
$1,427
$1,128
$258,243
213
11/2042
$1,421
$1,134
$257,109
214
12/2042
$1,415
$1,141
$255,968
215
1/2043
$1,408
$1,147
$254,821
216
2/2043
$1,402
$1,153
$253,668
End of year 18
217
3/2043
$1,396
$1,160
$252,508
218
4/2043
$1,389
$1,166
$251,342
219
5/2043
$1,383
$1,172
$250,170
220
6/2043
$1,376
$1,179
$248,991
221
7/2043
$1,370
$1,185
$247,806
222
8/2043
$1,363
$1,192
$246,614
223
9/2043
$1,357
$1,198
$245,416
224
10/2043
$1,350
$1,205
$244,211
225
11/2043
$1,344
$1,212
$242,999
226
12/2043
$1,337
$1,218
$241,781
227
1/2044
$1,330
$1,225
$240,556
228
2/2044
$1,323
$1,232
$239,324
End of year 19
229
3/2044
$1,317
$1,238
$238,086
230
4/2044
$1,310
$1,245
$236,840
231
5/2044
$1,303
$1,252
$235,588
232
6/2044
$1,296
$1,259
$234,329
233
7/2044
$1,289
$1,266
$233,063
234
8/2044
$1,282
$1,273
$231,790
235
9/2044
$1,275
$1,280
$230,510
236
10/2044
$1,268
$1,287
$229,223
237
11/2044
$1,261
$1,294
$227,929
238
12/2044
$1,254
$1,301
$226,628
239
1/2045
$1,247
$1,308
$225,320
240
2/2045
$1,240
$1,316
$224,004
End of year 20
241
3/2045
$1,232
$1,323
$222,681
242
4/2045
$1,225
$1,330
$221,351
243
5/2045
$1,218
$1,337
$220,014
244
6/2045
$1,210
$1,345
$218,669
245
7/2045
$1,203
$1,352
$217,317
246
8/2045
$1,196
$1,360
$215,958
247
9/2045
$1,188
$1,367
$214,591
248
10/2045
$1,181
$1,375
$213,216
249
11/2045
$1,173
$1,382
$211,834
250
12/2045
$1,165
$1,390
$210,444
251
1/2046
$1,158
$1,397
$209,047
252
2/2046
$1,150
$1,405
$207,642
End of year 21
253
3/2046
$1,142
$1,413
$206,229
254
4/2046
$1,135
$1,421
$204,808
255
5/2046
$1,127
$1,428
$203,380
256
6/2046
$1,119
$1,436
$201,944
257
7/2046
$1,111
$1,444
$200,500
258
8/2046
$1,103
$1,452
$199,048
259
9/2046
$1,095
$1,460
$197,588
260
10/2046
$1,087
$1,468
$196,119
261
11/2046
$1,079
$1,476
$194,643
262
12/2046
$1,071
$1,484
$193,159
263
1/2047
$1,063
$1,492
$191,667
264
2/2047
$1,054
$1,501
$190,166
End of year 22
265
3/2047
$1,046
$1,509
$188,657
266
4/2047
$1,038
$1,517
$187,140
267
5/2047
$1,030
$1,526
$185,614
268
6/2047
$1,021
$1,534
$184,080
269
7/2047
$1,013
$1,542
$182,538
270
8/2047
$1,004
$1,551
$180,987
271
9/2047
$996
$1,559
$179,427
272
10/2047
$987
$1,568
$177,859
273
11/2047
$979
$1,577
$176,283
274
12/2047
$970
$1,585
$174,697
275
1/2048
$961
$1,594
$173,103
276
2/2048
$952
$1,603
$171,501
End of year 23
277
3/2048
$944
$1,612
$169,889
278
4/2048
$935
$1,620
$168,268
279
5/2048
$926
$1,629
$166,639
280
6/2048
$917
$1,638
$165,001
281
7/2048
$908
$1,647
$163,353
282
8/2048
$899
$1,656
$161,697
283
9/2048
$890
$1,666
$160,031
284
10/2048
$880
$1,675
$158,357
285
11/2048
$871
$1,684
$156,673
286
12/2048
$862
$1,693
$154,979
287
1/2049
$853
$1,703
$153,277
288
2/2049
$843
$1,712
$151,565
End of year 24
289
3/2049
$834
$1,721
$149,844
290
4/2049
$824
$1,731
$148,113
291
5/2049
$815
$1,740
$146,373
292
6/2049
$805
$1,750
$144,623
293
7/2049
$796
$1,759
$142,863
294
8/2049
$786
$1,769
$141,094
295
9/2049
$776
$1,779
$139,315
296
10/2049
$766
$1,789
$137,526
297
11/2049
$757
$1,799
$135,728
298
12/2049
$747
$1,808
$133,919
299
1/2050
$737
$1,818
$132,101
300
2/2050
$727
$1,828
$130,273
End of year 25
301
3/2050
$717
$1,838
$128,434
302
4/2050
$707
$1,849
$126,586
303
5/2050
$696
$1,859
$124,727
304
6/2050
$686
$1,869
$122,858
305
7/2050
$676
$1,879
$120,979
306
8/2050
$666
$1,890
$119,089
307
9/2050
$655
$1,900
$117,189
308
10/2050
$645
$1,910
$115,279
309
11/2050
$634
$1,921
$113,358
310
12/2050
$624
$1,932
$111,426
311
1/2051
$613
$1,942
$109,484
312
2/2051
$602
$1,953
$107,531
End of year 26
313
3/2051
$592
$1,964
$105,568
314
4/2051
$581
$1,974
$103,593
315
5/2051
$570
$1,985
$101,608
316
6/2051
$559
$1,996
$99,612
317
7/2051
$548
$2,007
$97,605
318
8/2051
$537
$2,018
$95,587
319
9/2051
$526
$2,029
$93,558
320
10/2051
$515
$2,040
$91,517
321
11/2051
$503
$2,052
$89,465
322
12/2051
$492
$2,063
$87,402
323
1/2052
$481
$2,074
$85,328
324
2/2052
$469
$2,086
$83,242
End of year 27
325
3/2052
$458
$2,097
$81,145
326
4/2052
$446
$2,109
$79,037
327
5/2052
$435
$2,120
$76,916
328
6/2052
$423
$2,132
$74,784
329
7/2052
$411
$2,144
$72,640
330
8/2052
$400
$2,156
$70,485
331
9/2052
$388
$2,167
$68,318
332
10/2052
$376
$2,179
$66,138
333
11/2052
$364
$2,191
$63,947
334
12/2052
$352
$2,203
$61,744
335
1/2053
$340
$2,215
$59,528
336
2/2053
$328
$2,228
$57,300
End of year 28
337
3/2053
$315
$2,240
$55,061
338
4/2053
$303
$2,252
$52,808
339
5/2053
$291
$2,265
$50,544
340
6/2053
$278
$2,277
$48,267
341
7/2053
$266
$2,290
$45,977
342
8/2053
$253
$2,302
$43,675
343
9/2053
$240
$2,315
$41,360
344
10/2053
$228
$2,328
$39,032
345
11/2053
$215
$2,340
$36,692
346
12/2053
$202
$2,353
$34,339
347
1/2054
$189
$2,366
$31,972
348
2/2054
$176
$2,379
$29,593
End of year 29
349
3/2054
$163
$2,392
$27,201
350
4/2054
$150
$2,406
$24,795
351
5/2054
$136
$2,419
$22,376
352
6/2054
$123
$2,432
$19,944
353
7/2054
$110
$2,445
$17,499
354
8/2054
$96
$2,459
$15,040
355
9/2054
$83
$2,472
$12,568
356
10/2054
$69
$2,486
$10,082
357
11/2054
$55
$2,500
$7,582
358
12/2054
$42
$2,513
$5,068
359
1/2055
$28
$2,527
$2,541
360
2/2055
$14
$2,541
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
3/25-2/26
$26,277
$4,385
$395,615
2
3/26-2/27
$25,978
$4,684
$390,931
3
3/27-2/28
$25,660
$5,002
$385,929
4
3/28-2/29
$25,319
$5,343
$380,587
5
3/29-2/30
$24,956
$5,706
$374,880
6
3/30-2/31
$24,567
$6,095
$368,786
7
3/31-2/32
$24,153
$6,509
$362,276
8
3/32-2/33
$23,710
$6,952
$355,324
9
3/33-2/34
$23,236
$7,425
$347,898
10
3/34-2/35
$22,731
$7,931
$339,968
11
3/35-2/36
$22,191
$8,471
$331,497
12
3/36-2/37
$21,615
$9,047
$322,450
13
3/37-2/38
$20,999
$9,663
$312,787
14
3/38-2/39
$20,342
$10,320
$302,467
15
3/39-2/40
$19,639
$11,023
$291,444
16
3/40-2/41
$18,889
$11,773
$279,672
17
3/41-2/42
$18,088
$12,574
$267,098
18
3/42-2/43
$17,232
$13,430
$253,668
19
3/43-2/44
$16,318
$14,344
$239,324
20
3/44-2/45
$15,342
$15,320
$224,004
21
3/45-2/46
$14,300
$16,362
$207,642
22
3/46-2/47
$13,186
$17,476
$190,166
23
3/47-2/48
$11,997
$18,665
$171,501
24
3/48-2/49
$10,726
$19,936
$151,565
25
3/49-2/50
$9,370
$21,292
$130,273
26
3/50-2/51
$7,921
$22,741
$107,531
27
3/51-2/52
$6,373
$24,289
$83,242
28
3/52-2/53
$4,720
$25,942
$57,300
29
3/53-2/54
$2,955
$27,707
$29,593
30
3/54-2/55
$1,069
$29,593
$0
What Is Amortization?
In the context of a loan, amortization is a way of spreading the loan into a series of payments over a period of time. Using this technique, the loan balance will fall with each payment, and the borrower will pay off the balance after completing the series of scheduled payments.
Banks amortize many consumer-facing loans such as home mortgage loans, auto loans, and personal loans. Nonetheless, our mortgage amortization calculator is specially designed for home mortgage loans.
In most cases, the amortized payments are fixed monthly payments spread evenly throughout the loan term. Each payment is composed of two parts, interest and principal. Interest is the fee for borrowing the money, usually a percentage of the outstanding loan balance. The principal is the portion of the payment devoted to paying down the loan balance.
Over time, the balance of the loan falls as the principal repayment gradually increases. In other words, the interest portion of each payment will decrease as the loan's remaining principal balance falls. As the borrower approaches the end of the loan term, the bank will apply nearly all of the payment to reducing principal.
The amortization table below illustrates this process, calculating the fixed monthly payback amount and providing an annual or monthly amortization schedule of the loan. For example, a bank would amortize a five-year, $20,000 loan at a 5% interest rate into payments of $377.42 per month for five years.
Month
Beginning Balance
Payment
Interest
Principal
Ending Balance
1
$20,000.00
$377.42
$83.33
$294.09
$19,705.91
2
$19,705.91
$377.42
$82.11
$295.31
$19,410.59
3
$19,410.59
$377.42
$80.88
$296.54
$19,114.04
4
$19,114.04
$377.42
$79.64
$297.78
$18,816.26
...
...
...
...
...
...
58
$1,122.90
$377.42
$4.68
$372.74
$750.16
59
$750.16
$377.42
$3.13
$374.29
$375.86
60
$375.86
$377.42
$1.57
$375.85
$0.00
The calculator can also estimate other costs associated with homeownership, giving the borrower a more accurate financial picture of the costs associated with owning a home.
Amortizing a Mortgage Faster and Saving Money
In many situations, a borrower may want to pay off a mortgage earlier to save on interest, gain freedom from debt, or other reasons.
However, lengthier loans help to boost the profit of the lending banks. The amortization table shows how a loan can concentrate the larger interest payments towards the beginning of the loan, increasing a bank's revenue. Moreover, some loan contracts may not explicitly permit some loan reduction techniques. Thus, a borrower may first need to check with the lending bank to see if utilizing such strategies is allowed.
Nonetheless, assuming a mortgage agreement allows for faster repayment, a borrower can employ the following techniques to reduce mortgage balances more quickly and save money:
Increasing Regular Payments
One way to pay off a mortgage faster is to make small additional payments each month. This technique can save borrowers a considerable amount of money.
For example, a borrower who has a $150,000 mortgage amortized over 25 years at an interest rate of 5.45% can pay it off 2.5 years sooner by paying an extra $50 a month over the life of the mortgage. This would result in a savings of over $14,000.
Accelerating Payments
Most financial institutions offer several payment frequency options besides making one payment per month. Switching to a more frequent mode of payment, such as biweekly payments, has the effect of a borrower making an extra annual payment. This will result in significant savings on a mortgage.
For example, suppose a borrower has a $150,000 mortgage amortized over 25 years with an interest rate of 6.45% repaid in biweekly rather than monthly installments. By paying half of the monthly amount every two weeks, that person can save nearly $30,000 over the life of the loan.
Making Lump Sum Payments or Prepayments
A prepayment is a lump sum payment made in addition to regular mortgage installments. These additional payments reduce the outstanding balance of a mortgage, resulting in a shorter mortgage term. The earlier a borrower makes prepayments, the more it reduces the overall interest paid, typically leading to quicker mortgage repayment.
Nonetheless, borrowers should keep in mind that banks may impose stipulations governing prepayments since they reduce a bank's earnings on a given mortgage. These conditions may consist of a penalty for prepayments, a cap on how much borrowers can pay in a lump sum form, or a minimum amount specified for prepayments. If such conditions exist, a bank will usually spell them out in the mortgage agreement.
Refinancing a Mortgage
Refinancing involves replacing an existing mortgage with a new mortgage loan contract. While this usually means a different interest rate and new loan conditions, it also involves a new application, an underwriting process, and a closing, amounting to significant fees and other costs.
Despite these challenges, refinancing can benefit borrowers, but they should weigh the comparison carefully and read any new agreement thoroughly.
Drawbacks of Amortizing a Mortgage Faster
Before paying back a mortgage early, borrowers should also understand the disadvantages of paying ahead on a mortgage. Overall, mortgage rates are relatively low compared to the interest rates on other loan types such as personal loans or credit cards. Hence, paying ahead on a mortgage means the borrower cannot use the money to invest and make higher returns elsewhere. In other words, a borrower can incur a significant opportunity cost by paying off a mortgage with a 4% interest rate when they could earn a 10% return by investing that money.
Prepayment penalties or lost mortgage interest deductions on tax returns are other examples of opportunity costs. Borrowers should consider such factors before making additional payments.
