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: $2,562.57
Monthly
Total
Mortgage Payment
$2,562.57
$922,523.91
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
$3,687.57
$1,327,523.91
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$922,523.91
Total Interest
$522,523.91
Mortgage Payoff Date
Jul. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
07/2025
$2,210
$353
$399,647
2
8/2025
$2,208
$355
$399,293
3
9/2025
$2,206
$356
$398,936
4
10/2025
$2,204
$358
$398,578
5
11/2025
$2,202
$360
$398,218
6
12/2025
$2,200
$362
$397,855
7
1/2026
$2,198
$364
$397,491
8
2/2026
$2,196
$366
$397,124
9
3/2026
$2,194
$368
$396,756
10
4/2026
$2,192
$370
$396,385
11
5/2026
$2,190
$373
$396,013
12
6/2026
$2,188
$375
$395,638
End of year 1
13
7/2026
$2,186
$377
$395,262
14
8/2026
$2,184
$379
$394,883
15
9/2026
$2,182
$381
$394,502
16
10/2026
$2,180
$383
$394,119
17
11/2026
$2,178
$385
$393,734
18
12/2026
$2,175
$387
$393,347
19
1/2027
$2,173
$389
$392,957
20
2/2027
$2,171
$391
$392,566
21
3/2027
$2,169
$394
$392,172
22
4/2027
$2,167
$396
$391,777
23
5/2027
$2,165
$398
$391,379
24
6/2027
$2,162
$400
$390,978
End of year 2
25
7/2027
$2,160
$402
$390,576
26
8/2027
$2,158
$405
$390,171
27
9/2027
$2,156
$407
$389,764
28
10/2027
$2,153
$409
$389,355
29
11/2027
$2,151
$411
$388,944
30
12/2027
$2,149
$414
$388,530
31
1/2028
$2,147
$416
$388,114
32
2/2028
$2,144
$418
$387,696
33
3/2028
$2,142
$421
$387,276
34
4/2028
$2,140
$423
$386,853
35
5/2028
$2,137
$425
$386,427
36
6/2028
$2,135
$428
$386,000
End of year 3
37
7/2028
$2,133
$430
$385,570
38
8/2028
$2,130
$432
$385,138
39
9/2028
$2,128
$435
$384,703
40
10/2028
$2,125
$437
$384,266
41
11/2028
$2,123
$439
$383,826
42
12/2028
$2,121
$442
$383,385
43
1/2029
$2,118
$444
$382,940
44
2/2029
$2,116
$447
$382,493
45
3/2029
$2,113
$449
$382,044
46
4/2029
$2,111
$452
$381,592
47
5/2029
$2,108
$454
$381,138
48
6/2029
$2,106
$457
$380,681
End of year 4
49
7/2029
$2,103
$459
$380,222
50
8/2029
$2,101
$462
$379,760
51
9/2029
$2,098
$464
$379,296
52
10/2029
$2,096
$467
$378,829
53
11/2029
$2,093
$470
$378,359
54
12/2029
$2,090
$472
$377,887
55
1/2030
$2,088
$475
$377,412
56
2/2030
$2,085
$477
$376,935
57
3/2030
$2,083
$480
$376,455
58
4/2030
$2,080
$483
$375,972
59
5/2030
$2,077
$485
$375,487
60
6/2030
$2,075
$488
$374,999
End of year 5
61
7/2030
$2,072
$491
$374,508
62
8/2030
$2,069
$493
$374,015
63
9/2030
$2,066
$496
$373,519
64
10/2030
$2,064
$499
$373,020
65
11/2030
$2,061
$502
$372,518
66
12/2030
$2,058
$504
$372,014
67
1/2031
$2,055
$507
$371,507
68
2/2031
$2,053
$510
$370,997
69
3/2031
$2,050
$513
$370,484
70
4/2031
$2,047
$516
$369,968
71
5/2031
$2,044
$518
$369,450
72
6/2031
$2,041
$521
$368,928
End of year 6
73
7/2031
$2,038
$524
$368,404
74
8/2031
$2,035
$527
$367,877
75
9/2031
$2,033
$530
$367,347
76
10/2031
$2,030
$533
$366,814
77
11/2031
$2,027
$536
$366,278
78
12/2031
$2,024
$539
$365,739
79
1/2032
$2,021
$542
$365,197
80
2/2032
$2,018
$545
$364,652
81
3/2032
$2,015
$548
$364,105
82
4/2032
$2,012
$551
$363,554
83
5/2032
$2,009
$554
$363,000
84
6/2032
$2,006
$557
$362,443
End of year 7
85
7/2032
$2,002
$560
$361,883
86
8/2032
$1,999
$563
$361,320
87
9/2032
$1,996
$566
$360,753
88
10/2032
$1,993
$569
$360,184
89
11/2032
$1,990
$573
$359,611
90
12/2032
$1,987
$576
$359,036
91
1/2033
$1,984
$579
$358,457
92
2/2033
$1,980
$582
$357,875
93
3/2033
$1,977
$585
$357,289
94
4/2033
$1,974
$589
$356,701
95
5/2033
$1,971
$592
$356,109
96
6/2033
$1,968
$595
$355,514
End of year 8
97
7/2033
$1,964
$598
$354,916
98
8/2033
$1,961
$602
$354,314
99
9/2033
$1,958
$605
$353,709
100
10/2033
$1,954
$608
$353,101
101
11/2033
$1,951
$612
$352,489
102
12/2033
$1,948
$615
$351,874
103
1/2034
$1,944
$618
$351,255
104
2/2034
$1,941
$622
$350,634
105
3/2034
$1,937
$625
$350,008
106
4/2034
$1,934
$629
$349,379
107
5/2034
$1,930
$632
$348,747
108
6/2034
$1,927
$636
$348,111
End of year 9
109
7/2034
$1,923
$639
$347,472
110
8/2034
$1,920
$643
$346,829
111
9/2034
$1,916
$646
$346,183
112
10/2034
$1,913
$650
$345,533
113
11/2034
$1,909
$653
$344,880
114
12/2034
$1,905
$657
$344,223
115
1/2035
$1,902
$661
$343,562
116
2/2035
$1,898
$664
$342,897
117
3/2035
$1,895
$668
$342,229
118
4/2035
$1,891
$672
$341,558
119
5/2035
$1,887
$675
$340,882
120
6/2035
$1,883
$679
$340,203
End of year 10
121
7/2035
$1,880
$683
$339,520
122
8/2035
$1,876
$687
$338,833
123
9/2035
$1,872
$691
$338,143
124
10/2035
$1,868
$694
$337,448
125
11/2035
$1,864
$698
$336,750
126
12/2035
$1,861
$702
$336,048
127
1/2036
$1,857
$706
$335,342
128
2/2036
$1,853
$710
$334,633
129
3/2036
$1,849
$714
$333,919
130
4/2036
$1,845
$718
$333,201
131
5/2036
$1,841
$722
$332,480
132
6/2036
$1,837
$726
$331,754
End of year 11
133
7/2036
$1,833
$730
$331,024
134
8/2036
$1,829
$734
$330,291
135
9/2036
$1,825
$738
$329,553
136
10/2036
$1,821
$742
$328,811
137
11/2036
$1,817
$746
$328,065
138
12/2036
$1,813
$750
$327,315
139
1/2037
$1,808
$754
$326,561
140
2/2037
$1,804
$758
$325,803
141
3/2037
$1,800
$763
$325,040
142
4/2037
$1,796
$767
$324,274
143
5/2037
$1,792
$771
$323,503
144
6/2037
$1,787
$775
$322,727
End of year 12
145
7/2037
$1,783
$779
$321,948
146
8/2037
$1,779
$784
$321,164
147
9/2037
$1,774
$788
$320,376
148
10/2037
$1,770
$792
$319,584
149
11/2037
$1,766
$797
$318,787
150
12/2037
$1,761
$801
$317,985
151
1/2038
$1,757
$806
$317,180
152
2/2038
$1,752
$810
$316,370
153
3/2038
$1,748
$815
$315,555
154
4/2038
$1,743
$819
$314,736
155
5/2038
$1,739
$824
$313,912
156
6/2038
$1,734
$828
$313,084
End of year 13
157
7/2038
$1,730
$833
$312,251
158
8/2038
$1,725
$837
$311,414
159
9/2038
$1,721
$842
$310,572
160
10/2038
$1,716
$847
$309,725
161
11/2038
$1,711
$851
$308,874
162
12/2038
$1,707
$856
$308,018
163
1/2039
$1,702
$861
$307,157
164
2/2039
$1,697
$866
$306,291
165
3/2039
$1,692
$870
$305,421
166
4/2039
$1,687
$875
$304,546
167
5/2039
$1,683
$880
$303,666
168
6/2039
$1,678
$885
$302,781
End of year 14
169
7/2039
$1,673
$890
$301,892
170
8/2039
$1,668
$895
$300,997
171
9/2039
$1,663
$900
$300,097
172
10/2039
$1,658
$905
$299,193
173
11/2039
$1,653
$910
$298,283
174
12/2039
$1,648
$915
$297,369
175
1/2040
$1,643
$920
$296,449
176
2/2040
$1,638
$925
$295,524
177
3/2040
$1,633
$930
$294,595
178
4/2040
$1,628
$935
$293,660
179
5/2040
$1,622
$940
$292,720
180
6/2040
$1,617
$945
$291,774
End of year 15
181
7/2040
$1,612
$951
$290,824
182
8/2040
$1,607
$956
$289,868
183
9/2040
$1,602
$961
$288,907
184
10/2040
$1,596
$966
$287,941
185
11/2040
$1,591
$972
$286,969
186
12/2040
$1,586
$977
$285,992
187
1/2041
$1,580
$982
$285,009
188
2/2041
$1,575
$988
$284,022
189
3/2041
$1,569
$993
$283,028
190
4/2041
$1,564
$999
$282,029
191
5/2041
$1,558
$1,004
$281,025
192
6/2041
$1,553
$1,010
$280,015
End of year 16
193
7/2041
$1,547
$1,015
$279,000
194
8/2041
$1,541
$1,021
$277,979
195
9/2041
$1,536
$1,027
$276,952
196
10/2041
$1,530
$1,032
$275,919
197
11/2041
$1,524
$1,038
$274,881
198
12/2041
$1,519
$1,044
$273,837
199
1/2042
$1,513
$1,050
$272,788
200
2/2042
$1,507
$1,055
$271,732
201
3/2042
$1,501
$1,061
$270,671
202
4/2042
$1,495
$1,067
$269,604
203
5/2042
$1,490
$1,073
$268,531
204
6/2042
$1,484
$1,079
$267,452
End of year 17
205
7/2042
$1,478
$1,085
$266,367
206
8/2042
$1,472
$1,091
$265,276
207
9/2042
$1,466
$1,097
$264,179
208
10/2042
$1,460
$1,103
$263,076
209
11/2042
$1,453
$1,109
$261,967
210
12/2042
$1,447
$1,115
$260,852
211
1/2043
$1,441
$1,121
$259,731
212
2/2043
$1,435
$1,128
$258,603
213
3/2043
$1,429
$1,134
$257,470
214
4/2043
$1,423
$1,140
$256,329
215
5/2043
$1,416
$1,146
$255,183
216
6/2043
$1,410
$1,153
$254,030
End of year 18
217
7/2043
$1,404
$1,159
$252,871
218
8/2043
$1,397
$1,165
$251,706
219
9/2043
$1,391
$1,172
$250,534
220
10/2043
$1,384
$1,178
$249,356
221
11/2043
$1,378
$1,185
$248,171
222
12/2043
$1,371
$1,191
$246,979
223
1/2044
$1,365
$1,198
$245,781
224
2/2044
$1,358
$1,205
$244,577
225
3/2044
$1,351
$1,211
$243,366
226
4/2044
$1,345
$1,218
$242,148
227
5/2044
$1,338
$1,225
$240,923
228
6/2044
$1,331
$1,231
$239,691
End of year 19
229
7/2044
$1,324
$1,238
$238,453
230
8/2044
$1,317
$1,245
$237,208
231
9/2044
$1,311
$1,252
$235,956
232
10/2044
$1,304
$1,259
$234,697
233
11/2044
$1,297
$1,266
$233,431
234
12/2044
$1,290
$1,273
$232,158
235
1/2045
$1,283
$1,280
$230,878
236
2/2045
$1,276
$1,287
$229,591
237
3/2045
$1,268
$1,294
$228,297
238
4/2045
$1,261
$1,301
$226,996
239
5/2045
$1,254
$1,308
$225,688
240
6/2045
$1,247
$1,316
$224,372
End of year 20
241
7/2045
$1,240
$1,323
$223,049
242
8/2045
$1,232
$1,330
$221,719
243
9/2045
$1,225
$1,338
$220,381
244
10/2045
$1,218
$1,345
$219,036
245
11/2045
$1,210
$1,352
$217,684
246
12/2045
$1,203
$1,360
$216,324
247
1/2046
$1,195
$1,367
$214,957
248
2/2046
$1,188
$1,375
$213,582
249
3/2046
$1,180
$1,383
$212,199
250
4/2046
$1,172
$1,390
$210,809
251
5/2046
$1,165
$1,398
$209,411
252
6/2046
$1,157
$1,406
$208,006
End of year 21
253
7/2046
$1,149
$1,413
$206,592
254
8/2046
$1,141
$1,421
$205,171
255
9/2046
$1,134
$1,429
$203,742
256
10/2046
$1,126
$1,437
$202,305
257
11/2046
$1,118
$1,445
$200,861
258
12/2046
$1,110
$1,453
$199,408
259
1/2047
$1,102
$1,461
$197,947
260
2/2047
$1,094
$1,469
$196,478
261
3/2047
$1,086
$1,477
$195,001
262
4/2047
$1,077
$1,485
$193,516
263
5/2047
$1,069
$1,493
$192,022
264
6/2047
$1,061
$1,502
$190,521
End of year 22
265
7/2047
$1,053
$1,510
$189,011
266
8/2047
$1,044
$1,518
$187,493
267
9/2047
$1,036
$1,527
$185,966
268
10/2047
$1,027
$1,535
$184,431
269
11/2047
$1,019
$1,544
$182,887
270
12/2047
$1,010
$1,552
$181,335
271
1/2048
$1,002
$1,561
$179,774
272
2/2048
$993
$1,569
$178,205
273
3/2048
$985
$1,578
$176,627
274
4/2048
$976
$1,587
$175,040
275
5/2048
$967
$1,595
$173,445
276
6/2048
$958
$1,604
$171,841
End of year 23
277
7/2048
$949
$1,613
$170,228
278
8/2048
$941
$1,622
$168,605
279
9/2048
$932
$1,631
$166,974
280
10/2048
$923
$1,640
$165,334
281
11/2048
$913
$1,649
$163,685
282
12/2048
$904
$1,658
$162,027
283
1/2049
$895
$1,667
$160,360
284
2/2049
$886
$1,677
$158,683
285
3/2049
$877
$1,686
$156,997
286
4/2049
$867
$1,695
$155,302
287
5/2049
$858
$1,705
$153,598
288
6/2049
$849
$1,714
$151,884
End of year 24
289
7/2049
$839
$1,723
$150,160
290
8/2049
$830
$1,733
$148,427
291
9/2049
$820
$1,743
$146,685
292
10/2049
$810
$1,752
$144,933
293
11/2049
$801
$1,762
$143,171
294
12/2049
$791
$1,772
$141,399
295
1/2050
$781
$1,781
$139,618
296
2/2050
$771
$1,791
$137,827
297
3/2050
$761
$1,801
$136,026
298
4/2050
$752
$1,811
$134,215
299
5/2050
$742
$1,821
$132,394
300
6/2050
$731
$1,831
$130,563
End of year 25
301
7/2050
$721
$1,841
$128,721
302
8/2050
$711
$1,851
$126,870
303
9/2050
$701
$1,862
$125,008
304
10/2050
$691
$1,872
$123,137
305
11/2050
$680
$1,882
$121,254
306
12/2050
$670
$1,893
$119,362
307
1/2051
$659
$1,903
$117,459
308
2/2051
$649
$1,914
$115,545
309
3/2051
$638
$1,924
$113,621
310
4/2051
$628
$1,935
$111,686
311
5/2051
$617
$1,946
$109,741
312
6/2051
$606
$1,956
$107,784
End of year 26
313
7/2051
$596
$1,967
$105,817
314
8/2051
$585
$1,978
$103,839
315
9/2051
$574
$1,989
$101,850
316
10/2051
$563
$2,000
$99,851
317
11/2051
$552
$2,011
$97,840
318
12/2051
$541
$2,022
$95,818
319
1/2052
$529
$2,033
$93,785
320
2/2052
$518
$2,044
$91,740
321
3/2052
$507
$2,056
$89,684
322
4/2052
$496
$2,067
$87,617
323
5/2052
$484
$2,078
$85,539
324
6/2052
$473
$2,090
$83,449
End of year 27
325
7/2052
$461
$2,102
$81,347
326
8/2052
$449
$2,113
$79,234
327
9/2052
$438
$2,125
$77,109
328
10/2052
$426
$2,137
$74,973
329
11/2052
$414
$2,148
$72,825
330
12/2052
$402
$2,160
$70,664
331
1/2053
$390
$2,172
$68,492
332
2/2053
$378
$2,184
$66,308
333
3/2053
$366
$2,196
$64,112
334
4/2053
$354
$2,208
$61,904
335
5/2053
$342
$2,221
$59,683
336
6/2053
$330
$2,233
$57,450
End of year 28
337
7/2053
$317
$2,245
$55,205
338
8/2053
$305
$2,258
$52,947
339
9/2053
$293
$2,270
$50,677
340
10/2053
$280
$2,283
$48,395
341
11/2053
$267
$2,295
$46,100
342
12/2053
$255
$2,308
$43,792
343
1/2054
$242
$2,321
$41,471
344
2/2054
$229
$2,333
$39,138
345
3/2054
$216
$2,346
$36,791
346
4/2054
$203
$2,359
$34,432
347
5/2054
$190
$2,372
$32,060
348
6/2054
$177
$2,385
$29,674
End of year 29
349
7/2054
$164
$2,399
$27,276
350
8/2054
$151
$2,412
$24,864
351
9/2054
$137
$2,425
$22,439
352
10/2054
$124
$2,439
$20,000
353
11/2054
$111
$2,452
$17,548
354
12/2054
$97
$2,466
$15,082
355
1/2055
$83
$2,479
$12,603
356
2/2055
$70
$2,493
$10,110
357
3/2055
$56
$2,507
$7,604
358
4/2055
$42
$2,521
$5,083
359
5/2055
$28
$2,534
$2,548
360
6/2055
$14
$2,548
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
7/25-6/26
$26,389
$4,362
$395,638
2
7/26-6/27
$26,091
$4,660
$390,978
3
7/27-6/28
$25,772
$4,978
$386,000
4
7/28-6/29
$25,432
$5,319
$380,681
5
7/29-6/30
$25,069
$5,682
$374,999
6
7/30-6/31
$24,680
$6,071
$368,928
7
7/31-6/32
$24,265
$6,486
$362,443
8
7/32-6/33
$23,822
$6,929
$355,514
9
7/33-6/34
$23,348
$7,402
$348,111
10
7/34-6/35
$22,842
$7,908
$340,203
11
7/35-6/36
$22,302
$8,449
$331,754
12
7/36-6/37
$21,724
$9,027
$322,727
13
7/37-6/38
$21,107
$9,644
$313,084
14
7/38-6/39
$20,448
$10,303
$302,781
15
7/39-6/40
$19,744
$11,007
$291,774
16
7/40-6/41
$18,992
$11,759
$280,015
17
7/41-6/42
$18,188
$12,563
$267,452
18
7/42-6/43
$17,329
$13,422
$254,030
19
7/43-6/44
$16,412
$14,339
$239,691
20
7/44-6/45
$15,432
$15,319
$224,372
21
7/45-6/46
$14,384
$16,366
$208,006
22
7/46-6/47
$13,266
$17,485
$190,521
23
7/47-6/48
$12,071
$18,680
$171,841
24
7/48-6/49
$10,794
$19,957
$151,884
25
7/49-6/50
$9,430
$21,321
$130,563
26
7/50-6/51
$7,972
$22,778
$107,784
27
7/51-6/52
$6,415
$24,335
$83,449
28
7/52-6/53
$4,752
$25,999
$57,450
29
7/53-6/54
$2,975
$27,776
$29,674
30
7/54-6/55
$1,076
$29,674
$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.