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: $2,647.26
Monthly
Total
Mortgage Payment
$2,647.26
$953,011.96
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
$3,772.26
$1,358,011.96
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$953,011.96
Total Interest
$553,011.96
Mortgage Payoff Date
May. 2054
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
05/2024
$2,316
$331
$399,669
2
6/2024
$2,314
$333
$399,336
3
7/2024
$2,312
$335
$399,000
4
8/2024
$2,310
$337
$398,663
5
9/2024
$2,308
$339
$398,324
6
10/2024
$2,306
$341
$397,983
7
11/2024
$2,304
$343
$397,641
8
12/2024
$2,302
$345
$397,296
9
1/2025
$2,300
$347
$396,949
10
2/2025
$2,298
$349
$396,600
11
3/2025
$2,296
$351
$396,249
12
4/2025
$2,294
$353
$395,896
End of year 1
13
5/2025
$2,292
$355
$395,541
14
6/2025
$2,290
$357
$395,184
15
7/2025
$2,288
$359
$394,825
16
8/2025
$2,286
$361
$394,463
17
9/2025
$2,284
$363
$394,100
18
10/2025
$2,282
$365
$393,735
19
11/2025
$2,280
$368
$393,367
20
12/2025
$2,278
$370
$392,997
21
1/2026
$2,275
$372
$392,626
22
2/2026
$2,273
$374
$392,252
23
3/2026
$2,271
$376
$391,876
24
4/2026
$2,269
$378
$391,497
End of year 2
25
5/2026
$2,267
$380
$391,117
26
6/2026
$2,265
$383
$390,734
27
7/2026
$2,262
$385
$390,349
28
8/2026
$2,260
$387
$389,962
29
9/2026
$2,258
$389
$389,573
30
10/2026
$2,256
$392
$389,181
31
11/2026
$2,253
$394
$388,787
32
12/2026
$2,251
$396
$388,391
33
1/2027
$2,249
$398
$387,993
34
2/2027
$2,246
$401
$387,592
35
3/2027
$2,244
$403
$387,189
36
4/2027
$2,242
$405
$386,783
End of year 3
37
5/2027
$2,239
$408
$386,375
38
6/2027
$2,237
$410
$385,965
39
7/2027
$2,235
$413
$385,553
40
8/2027
$2,232
$415
$385,138
41
9/2027
$2,230
$417
$384,721
42
10/2027
$2,228
$420
$384,301
43
11/2027
$2,225
$422
$383,879
44
12/2027
$2,223
$425
$383,454
45
1/2028
$2,220
$427
$383,027
46
2/2028
$2,218
$430
$382,598
47
3/2028
$2,215
$432
$382,166
48
4/2028
$2,213
$435
$381,731
End of year 4
49
5/2028
$2,210
$437
$381,294
50
6/2028
$2,208
$440
$380,854
51
7/2028
$2,205
$442
$380,412
52
8/2028
$2,203
$445
$379,968
53
9/2028
$2,200
$447
$379,520
54
10/2028
$2,197
$450
$379,071
55
11/2028
$2,195
$452
$378,618
56
12/2028
$2,192
$455
$378,163
57
1/2029
$2,190
$458
$377,705
58
2/2029
$2,187
$460
$377,245
59
3/2029
$2,184
$463
$376,782
60
4/2029
$2,182
$466
$376,316
End of year 5
61
5/2029
$2,179
$468
$375,848
62
6/2029
$2,176
$471
$375,377
63
7/2029
$2,173
$474
$374,903
64
8/2029
$2,171
$477
$374,426
65
9/2029
$2,168
$479
$373,947
66
10/2029
$2,165
$482
$373,465
67
11/2029
$2,162
$485
$372,980
68
12/2029
$2,160
$488
$372,492
69
1/2030
$2,157
$491
$372,002
70
2/2030
$2,154
$493
$371,509
71
3/2030
$2,151
$496
$371,012
72
4/2030
$2,148
$499
$370,513
End of year 6
73
5/2030
$2,145
$502
$370,011
74
6/2030
$2,142
$505
$369,506
75
7/2030
$2,139
$508
$368,999
76
8/2030
$2,137
$511
$368,488
77
9/2030
$2,134
$514
$367,974
78
10/2030
$2,131
$517
$367,457
79
11/2030
$2,128
$520
$366,938
80
12/2030
$2,125
$523
$366,415
81
1/2031
$2,122
$526
$365,889
82
2/2031
$2,118
$529
$365,361
83
3/2031
$2,115
$532
$364,829
84
4/2031
$2,112
$535
$364,294
End of year 7
85
5/2031
$2,109
$538
$363,756
86
6/2031
$2,106
$541
$363,215
87
7/2031
$2,103
$544
$362,671
88
8/2031
$2,100
$547
$362,123
89
9/2031
$2,097
$551
$361,573
90
10/2031
$2,094
$554
$361,019
91
11/2031
$2,090
$557
$360,462
92
12/2031
$2,087
$560
$359,902
93
1/2032
$2,084
$563
$359,338
94
2/2032
$2,081
$567
$358,772
95
3/2032
$2,077
$570
$358,202
96
4/2032
$2,074
$573
$357,628
End of year 8
97
5/2032
$2,071
$577
$357,052
98
6/2032
$2,067
$580
$356,472
99
7/2032
$2,064
$583
$355,889
100
8/2032
$2,061
$587
$355,302
101
9/2032
$2,057
$590
$354,712
102
10/2032
$2,054
$593
$354,118
103
11/2032
$2,050
$597
$353,521
104
12/2032
$2,047
$600
$352,921
105
1/2033
$2,043
$604
$352,317
106
2/2033
$2,040
$607
$351,710
107
3/2033
$2,036
$611
$351,099
108
4/2033
$2,033
$614
$350,485
End of year 9
109
5/2033
$2,029
$618
$349,867
110
6/2033
$2,026
$622
$349,245
111
7/2033
$2,022
$625
$348,620
112
8/2033
$2,019
$629
$347,991
113
9/2033
$2,015
$632
$347,359
114
10/2033
$2,011
$636
$346,723
115
11/2033
$2,008
$640
$346,083
116
12/2033
$2,004
$643
$345,440
117
1/2034
$2,000
$647
$344,793
118
2/2034
$1,996
$651
$344,142
119
3/2034
$1,993
$655
$343,487
120
4/2034
$1,989
$658
$342,828
End of year 10
121
5/2034
$1,985
$662
$342,166
122
6/2034
$1,981
$666
$341,500
123
7/2034
$1,977
$670
$340,830
124
8/2034
$1,973
$674
$340,156
125
9/2034
$1,970
$678
$339,479
126
10/2034
$1,966
$682
$338,797
127
11/2034
$1,962
$686
$338,111
128
12/2034
$1,958
$690
$337,422
129
1/2035
$1,954
$694
$336,728
130
2/2035
$1,950
$698
$336,030
131
3/2035
$1,946
$702
$335,329
132
4/2035
$1,942
$706
$334,623
End of year 11
133
5/2035
$1,937
$710
$333,913
134
6/2035
$1,933
$714
$333,199
135
7/2035
$1,929
$718
$332,481
136
8/2035
$1,925
$722
$331,759
137
9/2035
$1,921
$726
$331,033
138
10/2035
$1,917
$731
$330,302
139
11/2035
$1,912
$735
$329,567
140
12/2035
$1,908
$739
$328,828
141
1/2036
$1,904
$743
$328,085
142
2/2036
$1,900
$748
$327,337
143
3/2036
$1,895
$752
$326,585
144
4/2036
$1,891
$756
$325,829
End of year 12
145
5/2036
$1,887
$761
$325,068
146
6/2036
$1,882
$765
$324,303
147
7/2036
$1,878
$770
$323,534
148
8/2036
$1,873
$774
$322,760
149
9/2036
$1,869
$778
$321,981
150
10/2036
$1,864
$783
$321,198
151
11/2036
$1,860
$788
$320,411
152
12/2036
$1,855
$792
$319,619
153
1/2037
$1,851
$797
$318,822
154
2/2037
$1,846
$801
$318,021
155
3/2037
$1,841
$806
$317,215
156
4/2037
$1,837
$811
$316,404
End of year 13
157
5/2037
$1,832
$815
$315,589
158
6/2037
$1,827
$820
$314,769
159
7/2037
$1,823
$825
$313,944
160
8/2037
$1,818
$830
$313,115
161
9/2037
$1,813
$834
$312,280
162
10/2037
$1,808
$839
$311,441
163
11/2037
$1,803
$844
$310,597
164
12/2037
$1,798
$849
$309,748
165
1/2038
$1,793
$854
$308,895
166
2/2038
$1,788
$859
$308,036
167
3/2038
$1,784
$864
$307,172
168
4/2038
$1,779
$869
$306,303
End of year 14
169
5/2038
$1,773
$874
$305,430
170
6/2038
$1,768
$879
$304,551
171
7/2038
$1,763
$884
$303,667
172
8/2038
$1,758
$889
$302,778
173
9/2038
$1,753
$894
$301,884
174
10/2038
$1,748
$899
$300,984
175
11/2038
$1,743
$905
$300,080
176
12/2038
$1,737
$910
$299,170
177
1/2039
$1,732
$915
$298,255
178
2/2039
$1,727
$920
$297,335
179
3/2039
$1,722
$926
$296,409
180
4/2039
$1,716
$931
$295,478
End of year 15
181
5/2039
$1,711
$936
$294,541
182
6/2039
$1,705
$942
$293,600
183
7/2039
$1,700
$947
$292,652
184
8/2039
$1,694
$953
$291,699
185
9/2039
$1,689
$958
$290,741
186
10/2039
$1,683
$964
$289,777
187
11/2039
$1,678
$969
$288,808
188
12/2039
$1,672
$975
$287,833
189
1/2040
$1,667
$981
$286,852
190
2/2040
$1,661
$986
$285,866
191
3/2040
$1,655
$992
$284,874
192
4/2040
$1,649
$998
$283,876
End of year 16
193
5/2040
$1,644
$1,004
$282,872
194
6/2040
$1,638
$1,009
$281,863
195
7/2040
$1,632
$1,015
$280,847
196
8/2040
$1,626
$1,021
$279,826
197
9/2040
$1,620
$1,027
$278,799
198
10/2040
$1,614
$1,033
$277,766
199
11/2040
$1,608
$1,039
$276,727
200
12/2040
$1,602
$1,045
$275,682
201
1/2041
$1,596
$1,051
$274,631
202
2/2041
$1,590
$1,057
$273,574
203
3/2041
$1,584
$1,063
$272,511
204
4/2041
$1,578
$1,069
$271,441
End of year 17
205
5/2041
$1,572
$1,076
$270,366
206
6/2041
$1,565
$1,082
$269,284
207
7/2041
$1,559
$1,088
$268,196
208
8/2041
$1,553
$1,094
$267,101
209
9/2041
$1,547
$1,101
$266,001
210
10/2041
$1,540
$1,107
$264,893
211
11/2041
$1,534
$1,114
$263,780
212
12/2041
$1,527
$1,120
$262,660
213
1/2042
$1,521
$1,126
$261,534
214
2/2042
$1,514
$1,133
$260,401
215
3/2042
$1,508
$1,140
$259,261
216
4/2042
$1,501
$1,146
$258,115
End of year 18
217
5/2042
$1,494
$1,153
$256,962
218
6/2042
$1,488
$1,159
$255,803
219
7/2042
$1,481
$1,166
$254,637
220
8/2042
$1,474
$1,173
$253,464
221
9/2042
$1,468
$1,180
$252,284
222
10/2042
$1,461
$1,187
$251,097
223
11/2042
$1,454
$1,193
$249,904
224
12/2042
$1,447
$1,200
$248,704
225
1/2043
$1,440
$1,207
$247,496
226
2/2043
$1,433
$1,214
$246,282
227
3/2043
$1,426
$1,221
$245,061
228
4/2043
$1,419
$1,228
$243,833
End of year 19
229
5/2043
$1,412
$1,235
$242,597
230
6/2043
$1,405
$1,243
$241,354
231
7/2043
$1,397
$1,250
$240,105
232
8/2043
$1,390
$1,257
$238,848
233
9/2043
$1,383
$1,264
$237,583
234
10/2043
$1,376
$1,272
$236,312
235
11/2043
$1,368
$1,279
$235,033
236
12/2043
$1,361
$1,286
$233,746
237
1/2044
$1,353
$1,294
$232,452
238
2/2044
$1,346
$1,301
$231,151
239
3/2044
$1,338
$1,309
$229,842
240
4/2044
$1,331
$1,316
$228,526
End of year 20
241
5/2044
$1,323
$1,324
$227,202
242
6/2044
$1,315
$1,332
$225,870
243
7/2044
$1,308
$1,339
$224,530
244
8/2044
$1,300
$1,347
$223,183
245
9/2044
$1,292
$1,355
$221,828
246
10/2044
$1,284
$1,363
$220,465
247
11/2044
$1,276
$1,371
$219,094
248
12/2044
$1,269
$1,379
$217,716
249
1/2045
$1,261
$1,387
$216,329
250
2/2045
$1,253
$1,395
$214,934
251
3/2045
$1,244
$1,403
$213,532
252
4/2045
$1,236
$1,411
$212,121
End of year 21
253
5/2045
$1,228
$1,419
$210,702
254
6/2045
$1,220
$1,427
$209,274
255
7/2045
$1,212
$1,436
$207,839
256
8/2045
$1,203
$1,444
$206,395
257
9/2045
$1,195
$1,452
$204,943
258
10/2045
$1,187
$1,461
$203,482
259
11/2045
$1,178
$1,469
$202,013
260
12/2045
$1,170
$1,478
$200,535
261
1/2046
$1,161
$1,486
$199,049
262
2/2046
$1,152
$1,495
$197,554
263
3/2046
$1,144
$1,503
$196,051
264
4/2046
$1,135
$1,512
$194,539
End of year 22
265
5/2046
$1,126
$1,521
$193,018
266
6/2046
$1,118
$1,530
$191,488
267
7/2046
$1,109
$1,539
$189,950
268
8/2046
$1,100
$1,547
$188,402
269
9/2046
$1,091
$1,556
$186,846
270
10/2046
$1,082
$1,565
$185,280
271
11/2046
$1,073
$1,574
$183,706
272
12/2046
$1,064
$1,584
$182,122
273
1/2047
$1,054
$1,593
$180,530
274
2/2047
$1,045
$1,602
$178,928
275
3/2047
$1,036
$1,611
$177,316
276
4/2047
$1,027
$1,621
$175,696
End of year 23
277
5/2047
$1,017
$1,630
$174,066
278
6/2047
$1,008
$1,639
$172,426
279
7/2047
$998
$1,649
$170,777
280
8/2047
$989
$1,658
$169,119
281
9/2047
$979
$1,668
$167,451
282
10/2047
$970
$1,678
$165,773
283
11/2047
$960
$1,687
$164,086
284
12/2047
$950
$1,697
$162,389
285
1/2048
$940
$1,707
$160,682
286
2/2048
$930
$1,717
$158,965
287
3/2048
$920
$1,727
$157,238
288
4/2048
$910
$1,737
$155,501
End of year 24
289
5/2048
$900
$1,747
$153,754
290
6/2048
$890
$1,757
$151,997
291
7/2048
$880
$1,767
$150,230
292
8/2048
$870
$1,777
$148,452
293
9/2048
$860
$1,788
$146,665
294
10/2048
$849
$1,798
$144,867
295
11/2048
$839
$1,808
$143,058
296
12/2048
$828
$1,819
$141,239
297
1/2049
$818
$1,829
$139,410
298
2/2049
$807
$1,840
$137,570
299
3/2049
$797
$1,851
$135,719
300
4/2049
$786
$1,861
$133,857
End of year 25
301
5/2049
$775
$1,872
$131,985
302
6/2049
$764
$1,883
$130,102
303
7/2049
$753
$1,894
$128,208
304
8/2049
$742
$1,905
$126,303
305
9/2049
$731
$1,916
$124,387
306
10/2049
$720
$1,927
$122,460
307
11/2049
$709
$1,938
$120,522
308
12/2049
$698
$1,949
$118,573
309
1/2050
$687
$1,961
$116,612
310
2/2050
$675
$1,972
$114,640
311
3/2050
$664
$1,983
$112,656
312
4/2050
$652
$1,995
$110,661
End of year 26
313
5/2050
$641
$2,007
$108,655
314
6/2050
$629
$2,018
$106,637
315
7/2050
$617
$2,030
$104,607
316
8/2050
$606
$2,042
$102,565
317
9/2050
$594
$2,053
$100,512
318
10/2050
$582
$2,065
$98,447
319
11/2050
$570
$2,077
$96,369
320
12/2050
$558
$2,089
$94,280
321
1/2051
$546
$2,101
$92,179
322
2/2051
$534
$2,114
$90,065
323
3/2051
$521
$2,126
$87,939
324
4/2051
$509
$2,138
$85,801
End of year 27
325
5/2051
$497
$2,150
$83,651
326
6/2051
$484
$2,163
$81,488
327
7/2051
$472
$2,175
$79,312
328
8/2051
$459
$2,188
$77,124
329
9/2051
$447
$2,201
$74,924
330
10/2051
$434
$2,213
$72,710
331
11/2051
$421
$2,226
$70,484
332
12/2051
$408
$2,239
$68,245
333
1/2052
$395
$2,252
$65,993
334
2/2052
$382
$2,265
$63,728
335
3/2052
$369
$2,278
$61,449
336
4/2052
$356
$2,291
$59,158
End of year 28
337
5/2052
$343
$2,305
$56,853
338
6/2052
$329
$2,318
$54,535
339
7/2052
$316
$2,331
$52,204
340
8/2052
$302
$2,345
$49,859
341
9/2052
$289
$2,359
$47,500
342
10/2052
$275
$2,372
$45,128
343
11/2052
$261
$2,386
$42,742
344
12/2052
$247
$2,400
$40,342
345
1/2053
$234
$2,414
$37,928
346
2/2053
$220
$2,428
$35,501
347
3/2053
$206
$2,442
$33,059
348
4/2053
$191
$2,456
$30,603
End of year 29
349
5/2053
$177
$2,470
$28,133
350
6/2053
$163
$2,484
$25,649
351
7/2053
$149
$2,499
$23,150
352
8/2053
$134
$2,513
$20,637
353
9/2053
$119
$2,528
$18,109
354
10/2053
$105
$2,542
$15,567
355
11/2053
$90
$2,557
$13,009
356
12/2053
$75
$2,572
$10,438
357
1/2054
$60
$2,587
$7,851
358
2/2054
$45
$2,602
$5,249
359
3/2054
$30
$2,617
$2,632
360
4/2054
$15
$2,632
$-0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
5/24-4/25
$27,663
$4,104
$395,896
2
5/25-4/26
$27,369
$4,399
$391,497
3
5/26-4/27
$27,053
$4,714
$386,783
4
5/27-4/28
$26,715
$5,052
$381,731
5
5/28-4/29
$26,352
$5,415
$376,316
6
5/29-4/30
$25,964
$5,803
$370,513
7
5/30-4/31
$25,548
$6,219
$364,294
8
5/31-4/32
$25,102
$6,666
$357,628
9
5/32-4/33
$24,623
$7,144
$350,485
10
5/33-4/34
$24,111
$7,656
$342,828
11
5/34-4/35
$23,562
$8,205
$334,623
12
5/35-4/36
$22,973
$8,794
$325,829
13
5/36-4/37
$22,342
$9,425
$316,404
14
5/37-4/38
$21,666
$10,101
$306,303
15
5/38-4/39
$20,942
$10,826
$295,478
16
5/39-4/40
$20,165
$11,602
$283,876
17
5/40-4/41
$19,333
$12,434
$271,441
18
5/41-4/42
$18,441
$13,326
$258,115
19
5/42-4/43
$17,485
$14,282
$243,833
20
5/43-4/44
$16,460
$15,307
$228,526
21
5/44-4/45
$15,362
$16,405
$212,121
22
5/45-4/46
$14,185
$17,582
$194,539
23
5/46-4/47
$12,924
$18,843
$175,696
24
5/47-4/48
$11,572
$20,195
$155,501
25
5/48-4/49
$10,124
$21,643
$133,857
26
5/49-4/50
$8,571
$23,196
$110,661
27
5/50-4/51
$6,907
$24,860
$85,801
28
5/51-4/52
$5,124
$26,643
$59,158
29
5/52-4/53
$3,212
$28,555
$30,603
30
5/53-4/54
$1,164
$30,603
$-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.