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: $2,509.89
Monthly
Total
Mortgage Payment
$2,509.89
$903,558.98
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
$3,634.89
$1,308,558.98
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$903,558.98
Total Interest
$503,558.98
Mortgage Payoff Date
Sep. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
09/2025
$2,143
$367
$399,633
2
10/2025
$2,141
$369
$399,265
3
11/2025
$2,139
$370
$398,894
4
12/2025
$2,137
$372
$398,522
5
1/2026
$2,135
$374
$398,147
6
2/2026
$2,133
$376
$397,771
7
3/2026
$2,131
$378
$397,393
8
4/2026
$2,129
$381
$397,012
9
5/2026
$2,127
$383
$396,629
10
6/2026
$2,125
$385
$396,245
11
7/2026
$2,123
$387
$395,858
12
8/2026
$2,121
$389
$395,469
End of year 1
13
9/2026
$2,119
$391
$395,079
14
10/2026
$2,117
$393
$394,686
15
11/2026
$2,115
$395
$394,291
16
12/2026
$2,113
$397
$393,893
17
1/2027
$2,111
$399
$393,494
18
2/2027
$2,108
$401
$393,093
19
3/2027
$2,106
$404
$392,689
20
4/2027
$2,104
$406
$392,283
21
5/2027
$2,102
$408
$391,876
22
6/2027
$2,100
$410
$391,466
23
7/2027
$2,098
$412
$391,053
24
8/2027
$2,095
$414
$390,639
End of year 2
25
9/2027
$2,093
$417
$390,222
26
10/2027
$2,091
$419
$389,803
27
11/2027
$2,089
$421
$389,382
28
12/2027
$2,086
$423
$388,958
29
1/2028
$2,084
$426
$388,533
30
2/2028
$2,082
$428
$388,105
31
3/2028
$2,080
$430
$387,674
32
4/2028
$2,077
$433
$387,242
33
5/2028
$2,075
$435
$386,807
34
6/2028
$2,073
$437
$386,370
35
7/2028
$2,070
$440
$385,930
36
8/2028
$2,068
$442
$385,488
End of year 3
37
9/2028
$2,066
$444
$385,044
38
10/2028
$2,063
$447
$384,597
39
11/2028
$2,061
$449
$384,148
40
12/2028
$2,058
$451
$383,697
41
1/2029
$2,056
$454
$383,243
42
2/2029
$2,054
$456
$382,786
43
3/2029
$2,051
$459
$382,327
44
4/2029
$2,049
$461
$381,866
45
5/2029
$2,046
$464
$381,403
46
6/2029
$2,044
$466
$380,936
47
7/2029
$2,041
$469
$380,468
48
8/2029
$2,039
$471
$379,996
End of year 4
49
9/2029
$2,036
$474
$379,523
50
10/2029
$2,034
$476
$379,046
51
11/2029
$2,031
$479
$378,568
52
12/2029
$2,028
$481
$378,086
53
1/2030
$2,026
$484
$377,602
54
2/2030
$2,023
$487
$377,116
55
3/2030
$2,021
$489
$376,626
56
4/2030
$2,018
$492
$376,135
57
5/2030
$2,015
$494
$375,640
58
6/2030
$2,013
$497
$375,143
59
7/2030
$2,010
$500
$374,643
60
8/2030
$2,007
$502
$374,141
End of year 5
61
9/2030
$2,005
$505
$373,636
62
10/2030
$2,002
$508
$373,128
63
11/2030
$1,999
$511
$372,618
64
12/2030
$1,997
$513
$372,104
65
1/2031
$1,994
$516
$371,588
66
2/2031
$1,991
$519
$371,069
67
3/2031
$1,988
$522
$370,548
68
4/2031
$1,986
$524
$370,023
69
5/2031
$1,983
$527
$369,496
70
6/2031
$1,980
$530
$368,966
71
7/2031
$1,977
$533
$368,433
72
8/2031
$1,974
$536
$367,898
End of year 6
73
9/2031
$1,971
$539
$367,359
74
10/2031
$1,968
$541
$366,818
75
11/2031
$1,966
$544
$366,273
76
12/2031
$1,963
$547
$365,726
77
1/2032
$1,960
$550
$365,176
78
2/2032
$1,957
$553
$364,623
79
3/2032
$1,954
$556
$364,067
80
4/2032
$1,951
$559
$363,508
81
5/2032
$1,948
$562
$362,945
82
6/2032
$1,945
$565
$362,380
83
7/2032
$1,942
$568
$361,812
84
8/2032
$1,939
$571
$361,241
End of year 7
85
9/2032
$1,936
$574
$360,667
86
10/2032
$1,933
$577
$360,089
87
11/2032
$1,929
$580
$359,509
88
12/2032
$1,926
$584
$358,926
89
1/2033
$1,923
$587
$358,339
90
2/2033
$1,920
$590
$357,749
91
3/2033
$1,917
$593
$357,156
92
4/2033
$1,914
$596
$356,560
93
5/2033
$1,911
$599
$355,961
94
6/2033
$1,907
$603
$355,358
95
7/2033
$1,904
$606
$354,752
96
8/2033
$1,901
$609
$354,143
End of year 8
97
9/2033
$1,898
$612
$353,531
98
10/2033
$1,894
$616
$352,916
99
11/2033
$1,891
$619
$352,297
100
12/2033
$1,888
$622
$351,675
101
1/2034
$1,884
$625
$351,049
102
2/2034
$1,881
$629
$350,420
103
3/2034
$1,878
$632
$349,788
104
4/2034
$1,874
$636
$349,152
105
5/2034
$1,871
$639
$348,513
106
6/2034
$1,867
$642
$347,871
107
7/2034
$1,864
$646
$347,225
108
8/2034
$1,861
$649
$346,576
End of year 9
109
9/2034
$1,857
$653
$345,923
110
10/2034
$1,854
$656
$345,267
111
11/2034
$1,850
$660
$344,607
112
12/2034
$1,847
$663
$343,943
113
1/2035
$1,843
$667
$343,277
114
2/2035
$1,839
$670
$342,606
115
3/2035
$1,836
$674
$341,932
116
4/2035
$1,832
$678
$341,254
117
5/2035
$1,829
$681
$340,573
118
6/2035
$1,825
$685
$339,888
119
7/2035
$1,821
$689
$339,199
120
8/2035
$1,818
$692
$338,507
End of year 10
121
9/2035
$1,814
$696
$337,811
122
10/2035
$1,810
$700
$337,111
123
11/2035
$1,806
$704
$336,408
124
12/2035
$1,803
$707
$335,700
125
1/2036
$1,799
$711
$334,989
126
2/2036
$1,795
$715
$334,274
127
3/2036
$1,791
$719
$333,556
128
4/2036
$1,787
$723
$332,833
129
5/2036
$1,783
$726
$332,107
130
6/2036
$1,780
$730
$331,376
131
7/2036
$1,776
$734
$330,642
132
8/2036
$1,772
$738
$329,904
End of year 11
133
9/2036
$1,768
$742
$329,162
134
10/2036
$1,764
$746
$328,415
135
11/2036
$1,760
$750
$327,665
136
12/2036
$1,756
$754
$326,911
137
1/2037
$1,752
$758
$326,153
138
2/2037
$1,748
$762
$325,391
139
3/2037
$1,744
$766
$324,624
140
4/2037
$1,739
$770
$323,854
141
5/2037
$1,735
$775
$323,079
142
6/2037
$1,731
$779
$322,301
143
7/2037
$1,727
$783
$321,518
144
8/2037
$1,723
$787
$320,731
End of year 12
145
9/2037
$1,719
$791
$319,939
146
10/2037
$1,714
$796
$319,144
147
11/2037
$1,710
$800
$318,344
148
12/2037
$1,706
$804
$317,540
149
1/2038
$1,701
$808
$316,732
150
2/2038
$1,697
$813
$315,919
151
3/2038
$1,693
$817
$315,102
152
4/2038
$1,688
$821
$314,280
153
5/2038
$1,684
$826
$313,454
154
6/2038
$1,680
$830
$312,624
155
7/2038
$1,675
$835
$311,789
156
8/2038
$1,671
$839
$310,950
End of year 13
157
9/2038
$1,666
$844
$310,106
158
10/2038
$1,662
$848
$309,258
159
11/2038
$1,657
$853
$308,405
160
12/2038
$1,653
$857
$307,548
161
1/2039
$1,648
$862
$306,686
162
2/2039
$1,643
$867
$305,820
163
3/2039
$1,639
$871
$304,948
164
4/2039
$1,634
$876
$304,072
165
5/2039
$1,629
$881
$303,192
166
6/2039
$1,625
$885
$302,307
167
7/2039
$1,620
$890
$301,417
168
8/2039
$1,615
$895
$300,522
End of year 14
169
9/2039
$1,610
$900
$299,622
170
10/2039
$1,605
$904
$298,718
171
11/2039
$1,601
$909
$297,809
172
12/2039
$1,596
$914
$296,894
173
1/2040
$1,591
$919
$295,975
174
2/2040
$1,586
$924
$295,051
175
3/2040
$1,581
$929
$294,123
176
4/2040
$1,576
$934
$293,189
177
5/2040
$1,571
$939
$292,250
178
6/2040
$1,566
$944
$291,306
179
7/2040
$1,561
$949
$290,357
180
8/2040
$1,556
$954
$289,403
End of year 15
181
9/2040
$1,551
$959
$288,444
182
10/2040
$1,546
$964
$287,479
183
11/2040
$1,540
$969
$286,510
184
12/2040
$1,535
$975
$285,535
185
1/2041
$1,530
$980
$284,555
186
2/2041
$1,525
$985
$283,570
187
3/2041
$1,519
$990
$282,580
188
4/2041
$1,514
$996
$281,584
189
5/2041
$1,509
$1,001
$280,583
190
6/2041
$1,503
$1,006
$279,577
191
7/2041
$1,498
$1,012
$278,565
192
8/2041
$1,493
$1,017
$277,547
End of year 16
193
9/2041
$1,487
$1,023
$276,525
194
10/2041
$1,482
$1,028
$275,497
195
11/2041
$1,476
$1,034
$274,463
196
12/2041
$1,471
$1,039
$273,424
197
1/2042
$1,465
$1,045
$272,379
198
2/2042
$1,459
$1,050
$271,329
199
3/2042
$1,454
$1,056
$270,272
200
4/2042
$1,448
$1,062
$269,211
201
5/2042
$1,443
$1,067
$268,143
202
6/2042
$1,437
$1,073
$267,070
203
7/2042
$1,431
$1,079
$265,992
204
8/2042
$1,425
$1,085
$264,907
End of year 17
205
9/2042
$1,419
$1,090
$263,816
206
10/2042
$1,414
$1,096
$262,720
207
11/2042
$1,408
$1,102
$261,618
208
12/2042
$1,402
$1,108
$260,510
209
1/2043
$1,396
$1,114
$259,396
210
2/2043
$1,390
$1,120
$258,276
211
3/2043
$1,384
$1,126
$257,150
212
4/2043
$1,378
$1,132
$256,018
213
5/2043
$1,372
$1,138
$254,880
214
6/2043
$1,366
$1,144
$253,736
215
7/2043
$1,360
$1,150
$252,586
216
8/2043
$1,353
$1,156
$251,429
End of year 18
217
9/2043
$1,347
$1,163
$250,267
218
10/2043
$1,341
$1,169
$249,098
219
11/2043
$1,335
$1,175
$247,923
220
12/2043
$1,328
$1,181
$246,741
221
1/2044
$1,322
$1,188
$245,553
222
2/2044
$1,316
$1,194
$244,359
223
3/2044
$1,309
$1,201
$243,159
224
4/2044
$1,303
$1,207
$241,952
225
5/2044
$1,296
$1,213
$240,738
226
6/2044
$1,290
$1,220
$239,518
227
7/2044
$1,283
$1,226
$238,292
228
8/2044
$1,277
$1,233
$237,059
End of year 19
229
9/2044
$1,270
$1,240
$235,819
230
10/2044
$1,264
$1,246
$234,573
231
11/2044
$1,257
$1,253
$233,320
232
12/2044
$1,250
$1,260
$232,060
233
1/2045
$1,243
$1,266
$230,794
234
2/2045
$1,237
$1,273
$229,521
235
3/2045
$1,230
$1,280
$228,241
236
4/2045
$1,223
$1,287
$226,954
237
5/2045
$1,216
$1,294
$225,660
238
6/2045
$1,209
$1,301
$224,359
239
7/2045
$1,202
$1,308
$223,051
240
8/2045
$1,195
$1,315
$221,737
End of year 20
241
9/2045
$1,188
$1,322
$220,415
242
10/2045
$1,181
$1,329
$219,086
243
11/2045
$1,174
$1,336
$217,750
244
12/2045
$1,167
$1,343
$216,407
245
1/2046
$1,160
$1,350
$215,057
246
2/2046
$1,152
$1,358
$213,699
247
3/2046
$1,145
$1,365
$212,334
248
4/2046
$1,138
$1,372
$210,962
249
5/2046
$1,130
$1,379
$209,583
250
6/2046
$1,123
$1,387
$208,196
251
7/2046
$1,116
$1,394
$206,802
252
8/2046
$1,108
$1,402
$205,400
End of year 21
253
9/2046
$1,101
$1,409
$203,991
254
10/2046
$1,093
$1,417
$202,574
255
11/2046
$1,085
$1,424
$201,149
256
12/2046
$1,078
$1,432
$199,717
257
1/2047
$1,070
$1,440
$198,278
258
2/2047
$1,062
$1,447
$196,830
259
3/2047
$1,055
$1,455
$195,375
260
4/2047
$1,047
$1,463
$193,912
261
5/2047
$1,039
$1,471
$192,441
262
6/2047
$1,031
$1,479
$190,962
263
7/2047
$1,023
$1,487
$189,476
264
8/2047
$1,015
$1,495
$187,981
End of year 22
265
9/2047
$1,007
$1,503
$186,479
266
10/2047
$999
$1,511
$184,968
267
11/2047
$991
$1,519
$183,449
268
12/2047
$983
$1,527
$181,922
269
1/2048
$975
$1,535
$180,387
270
2/2048
$967
$1,543
$178,844
271
3/2048
$958
$1,552
$177,292
272
4/2048
$950
$1,560
$175,732
273
5/2048
$942
$1,568
$174,164
274
6/2048
$933
$1,577
$172,587
275
7/2048
$925
$1,585
$171,002
276
8/2048
$916
$1,594
$169,409
End of year 23
277
9/2048
$908
$1,602
$167,807
278
10/2048
$899
$1,611
$166,196
279
11/2048
$891
$1,619
$164,576
280
12/2048
$882
$1,628
$162,948
281
1/2049
$873
$1,637
$161,312
282
2/2049
$864
$1,646
$159,666
283
3/2049
$856
$1,654
$158,012
284
4/2049
$847
$1,663
$156,349
285
5/2049
$838
$1,672
$154,676
286
6/2049
$829
$1,681
$152,995
287
7/2049
$820
$1,690
$151,305
288
8/2049
$811
$1,699
$149,606
End of year 24
289
9/2049
$802
$1,708
$147,898
290
10/2049
$792
$1,717
$146,181
291
11/2049
$783
$1,727
$144,454
292
12/2049
$774
$1,736
$142,718
293
1/2050
$765
$1,745
$140,973
294
2/2050
$755
$1,755
$139,218
295
3/2050
$746
$1,764
$137,455
296
4/2050
$737
$1,773
$135,681
297
5/2050
$727
$1,783
$133,898
298
6/2050
$717
$1,792
$132,106
299
7/2050
$708
$1,802
$130,304
300
8/2050
$698
$1,812
$128,492
End of year 25
301
9/2050
$689
$1,821
$126,671
302
10/2050
$679
$1,831
$124,840
303
11/2050
$669
$1,841
$122,999
304
12/2050
$659
$1,851
$121,148
305
1/2051
$649
$1,861
$119,287
306
2/2051
$639
$1,871
$117,416
307
3/2051
$629
$1,881
$115,536
308
4/2051
$619
$1,891
$113,645
309
5/2051
$609
$1,901
$111,744
310
6/2051
$599
$1,911
$109,833
311
7/2051
$589
$1,921
$107,911
312
8/2051
$578
$1,932
$105,980
End of year 26
313
9/2051
$568
$1,942
$104,038
314
10/2051
$557
$1,952
$102,085
315
11/2051
$547
$1,963
$100,123
316
12/2051
$536
$1,973
$98,149
317
1/2052
$526
$1,984
$96,165
318
2/2052
$515
$1,995
$94,171
319
3/2052
$505
$2,005
$92,165
320
4/2052
$494
$2,016
$90,149
321
5/2052
$483
$2,027
$88,122
322
6/2052
$472
$2,038
$86,085
323
7/2052
$461
$2,049
$84,036
324
8/2052
$450
$2,060
$81,976
End of year 27
325
9/2052
$439
$2,071
$79,906
326
10/2052
$428
$2,082
$77,824
327
11/2052
$417
$2,093
$75,731
328
12/2052
$406
$2,104
$73,627
329
1/2053
$395
$2,115
$71,512
330
2/2053
$383
$2,127
$69,385
331
3/2053
$372
$2,138
$67,247
332
4/2053
$360
$2,150
$65,097
333
5/2053
$349
$2,161
$62,936
334
6/2053
$337
$2,173
$60,764
335
7/2053
$326
$2,184
$58,579
336
8/2053
$314
$2,196
$56,383
End of year 28
337
9/2053
$302
$2,208
$54,176
338
10/2053
$290
$2,220
$51,956
339
11/2053
$278
$2,231
$49,725
340
12/2053
$266
$2,243
$47,481
341
1/2054
$254
$2,255
$45,226
342
2/2054
$242
$2,268
$42,958
343
3/2054
$230
$2,280
$40,678
344
4/2054
$218
$2,292
$38,386
345
5/2054
$206
$2,304
$36,082
346
6/2054
$193
$2,317
$33,766
347
7/2054
$181
$2,329
$31,437
348
8/2054
$168
$2,341
$29,095
End of year 29
349
9/2054
$156
$2,354
$26,741
350
10/2054
$143
$2,367
$24,375
351
11/2054
$131
$2,379
$21,995
352
12/2054
$118
$2,392
$19,603
353
1/2055
$105
$2,405
$17,199
354
2/2055
$92
$2,418
$14,781
355
3/2055
$79
$2,431
$12,350
356
4/2055
$66
$2,444
$9,906
357
5/2055
$53
$2,457
$7,450
358
6/2055
$40
$2,470
$4,980
359
7/2055
$27
$2,483
$2,497
360
8/2055
$13
$2,497
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
9/25-8/26
$25,588
$4,531
$395,469
2
9/26-8/27
$25,288
$4,831
$390,639
3
9/27-8/28
$24,968
$5,151
$385,488
4
9/28-8/29
$24,627
$5,492
$379,996
5
9/29-8/30
$24,263
$5,855
$374,141
6
9/30-8/31
$23,875
$6,243
$367,898
7
9/31-8/32
$23,462
$6,657
$361,241
8
9/32-8/33
$23,021
$7,098
$354,143
9
9/33-8/34
$22,551
$7,568
$346,576
10
9/34-8/35
$22,050
$8,069
$338,507
11
9/35-8/36
$21,515
$8,603
$329,904
12
9/36-8/37
$20,946
$9,173
$320,731
13
9/37-8/38
$20,338
$9,781
$310,950
14
9/38-8/39
$19,690
$10,428
$300,522
15
9/39-8/40
$19,000
$11,119
$289,403
16
9/40-8/41
$18,263
$11,855
$277,547
17
9/41-8/42
$17,478
$12,641
$264,907
18
9/42-8/43
$16,641
$13,478
$251,429
19
9/43-8/44
$15,748
$14,370
$237,059
20
9/44-8/45
$14,797
$15,322
$221,737
21
9/45-8/46
$13,782
$16,337
$205,400
22
9/46-8/47
$12,700
$17,419
$187,981
23
9/47-8/48
$11,546
$18,572
$169,409
24
9/48-8/49
$10,316
$19,802
$149,606
25
9/49-8/50
$9,005
$21,114
$128,492
26
9/50-8/51
$7,606
$22,512
$105,980
27
9/51-8/52
$6,115
$24,003
$81,976
28
9/52-8/53
$4,526
$25,593
$56,383
29
9/53-8/54
$2,831
$27,288
$29,095
30
9/54-8/55
$1,023
$29,095
$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.