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: $2,437.17
Monthly
Total
Mortgage Payment
$2,437.17
$877,381.78
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
$3,562.17
$1,282,381.78
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$877,381.78
Total Interest
$477,381.78
Mortgage Payoff Date
Sep. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
09/2025
$2,050
$387
$399,613
2
10/2025
$2,048
$389
$399,224
3
11/2025
$2,046
$391
$398,834
4
12/2025
$2,044
$393
$398,441
5
1/2026
$2,042
$395
$398,046
6
2/2026
$2,040
$397
$397,649
7
3/2026
$2,038
$399
$397,250
8
4/2026
$2,036
$401
$396,849
9
5/2026
$2,034
$403
$396,446
10
6/2026
$2,032
$405
$396,041
11
7/2026
$2,030
$407
$395,634
12
8/2026
$2,028
$409
$395,225
End of year 1
13
9/2026
$2,026
$411
$394,813
14
10/2026
$2,024
$413
$394,400
15
11/2026
$2,022
$416
$393,985
16
12/2026
$2,019
$418
$393,567
17
1/2027
$2,017
$420
$393,147
18
2/2027
$2,015
$422
$392,725
19
3/2027
$2,013
$424
$392,301
20
4/2027
$2,011
$426
$391,875
21
5/2027
$2,009
$428
$391,446
22
6/2027
$2,006
$431
$391,015
23
7/2027
$2,004
$433
$390,583
24
8/2027
$2,002
$435
$390,147
End of year 2
25
9/2027
$2,000
$437
$389,710
26
10/2027
$1,998
$440
$389,271
27
11/2027
$1,995
$442
$388,829
28
12/2027
$1,993
$444
$388,385
29
1/2028
$1,991
$446
$387,938
30
2/2028
$1,989
$449
$387,490
31
3/2028
$1,986
$451
$387,039
32
4/2028
$1,984
$453
$386,585
33
5/2028
$1,982
$456
$386,130
34
6/2028
$1,979
$458
$385,672
35
7/2028
$1,977
$460
$385,212
36
8/2028
$1,975
$463
$384,749
End of year 3
37
9/2028
$1,972
$465
$384,284
38
10/2028
$1,970
$467
$383,816
39
11/2028
$1,967
$470
$383,347
40
12/2028
$1,965
$472
$382,874
41
1/2029
$1,963
$475
$382,400
42
2/2029
$1,960
$477
$381,923
43
3/2029
$1,958
$479
$381,443
44
4/2029
$1,955
$482
$380,961
45
5/2029
$1,953
$484
$380,477
46
6/2029
$1,950
$487
$379,990
47
7/2029
$1,948
$489
$379,501
48
8/2029
$1,945
$492
$379,009
End of year 4
49
9/2029
$1,943
$494
$378,514
50
10/2029
$1,940
$497
$378,017
51
11/2029
$1,938
$500
$377,518
52
12/2029
$1,935
$502
$377,016
53
1/2030
$1,933
$505
$376,511
54
2/2030
$1,930
$507
$376,004
55
3/2030
$1,927
$510
$375,494
56
4/2030
$1,925
$512
$374,981
57
5/2030
$1,922
$515
$374,466
58
6/2030
$1,919
$518
$373,949
59
7/2030
$1,917
$520
$373,428
60
8/2030
$1,914
$523
$372,905
End of year 5
61
9/2030
$1,911
$526
$372,380
62
10/2030
$1,909
$528
$371,851
63
11/2030
$1,906
$531
$371,320
64
12/2030
$1,903
$534
$370,786
65
1/2031
$1,901
$537
$370,250
66
2/2031
$1,898
$539
$369,710
67
3/2031
$1,895
$542
$369,168
68
4/2031
$1,892
$545
$368,623
69
5/2031
$1,890
$548
$368,076
70
6/2031
$1,887
$550
$367,525
71
7/2031
$1,884
$553
$366,972
72
8/2031
$1,881
$556
$366,416
End of year 6
73
9/2031
$1,878
$559
$365,857
74
10/2031
$1,875
$562
$365,295
75
11/2031
$1,872
$565
$364,730
76
12/2031
$1,870
$568
$364,163
77
1/2032
$1,867
$571
$363,592
78
2/2032
$1,864
$573
$363,019
79
3/2032
$1,861
$576
$362,442
80
4/2032
$1,858
$579
$361,863
81
5/2032
$1,855
$582
$361,280
82
6/2032
$1,852
$585
$360,695
83
7/2032
$1,849
$588
$360,107
84
8/2032
$1,846
$591
$359,515
End of year 7
85
9/2032
$1,843
$594
$358,921
86
10/2032
$1,840
$597
$358,324
87
11/2032
$1,837
$600
$357,723
88
12/2032
$1,834
$604
$357,120
89
1/2033
$1,831
$607
$356,513
90
2/2033
$1,827
$610
$355,903
91
3/2033
$1,824
$613
$355,290
92
4/2033
$1,821
$616
$354,674
93
5/2033
$1,818
$619
$354,055
94
6/2033
$1,815
$622
$353,433
95
7/2033
$1,812
$626
$352,807
96
8/2033
$1,808
$629
$352,179
End of year 8
97
9/2033
$1,805
$632
$351,547
98
10/2033
$1,802
$635
$350,912
99
11/2033
$1,799
$638
$350,273
100
12/2033
$1,795
$642
$349,631
101
1/2034
$1,792
$645
$348,986
102
2/2034
$1,789
$648
$348,338
103
3/2034
$1,786
$652
$347,686
104
4/2034
$1,782
$655
$347,031
105
5/2034
$1,779
$658
$346,373
106
6/2034
$1,775
$662
$345,711
107
7/2034
$1,772
$665
$345,046
108
8/2034
$1,769
$669
$344,378
End of year 9
109
9/2034
$1,765
$672
$343,706
110
10/2034
$1,762
$675
$343,030
111
11/2034
$1,758
$679
$342,351
112
12/2034
$1,755
$682
$341,669
113
1/2035
$1,751
$686
$340,983
114
2/2035
$1,748
$689
$340,294
115
3/2035
$1,744
$693
$339,601
116
4/2035
$1,741
$696
$338,905
117
5/2035
$1,737
$700
$338,205
118
6/2035
$1,734
$704
$337,501
119
7/2035
$1,730
$707
$336,794
120
8/2035
$1,726
$711
$336,083
End of year 10
121
9/2035
$1,723
$714
$335,369
122
10/2035
$1,719
$718
$334,650
123
11/2035
$1,715
$722
$333,929
124
12/2035
$1,712
$726
$333,203
125
1/2036
$1,708
$729
$332,474
126
2/2036
$1,704
$733
$331,741
127
3/2036
$1,700
$737
$331,004
128
4/2036
$1,697
$740
$330,264
129
5/2036
$1,693
$744
$329,519
130
6/2036
$1,689
$748
$328,771
131
7/2036
$1,685
$752
$328,019
132
8/2036
$1,681
$756
$327,264
End of year 11
133
9/2036
$1,677
$760
$326,504
134
10/2036
$1,674
$764
$325,740
135
11/2036
$1,670
$767
$324,973
136
12/2036
$1,666
$771
$324,201
137
1/2037
$1,662
$775
$323,426
138
2/2037
$1,658
$779
$322,647
139
3/2037
$1,654
$783
$321,863
140
4/2037
$1,650
$787
$321,076
141
5/2037
$1,646
$791
$320,285
142
6/2037
$1,642
$795
$319,489
143
7/2037
$1,638
$800
$318,690
144
8/2037
$1,634
$804
$317,886
End of year 12
145
9/2037
$1,629
$808
$317,078
146
10/2037
$1,625
$812
$316,266
147
11/2037
$1,621
$816
$315,450
148
12/2037
$1,617
$820
$314,630
149
1/2038
$1,613
$824
$313,806
150
2/2038
$1,609
$829
$312,977
151
3/2038
$1,604
$833
$312,144
152
4/2038
$1,600
$837
$311,307
153
5/2038
$1,596
$841
$310,465
154
6/2038
$1,591
$846
$309,620
155
7/2038
$1,587
$850
$308,770
156
8/2038
$1,583
$854
$307,915
End of year 13
157
9/2038
$1,578
$859
$307,056
158
10/2038
$1,574
$863
$306,193
159
11/2038
$1,569
$868
$305,325
160
12/2038
$1,565
$872
$304,453
161
1/2039
$1,561
$877
$303,577
162
2/2039
$1,556
$881
$302,696
163
3/2039
$1,552
$886
$301,810
164
4/2039
$1,547
$890
$300,920
165
5/2039
$1,542
$895
$300,025
166
6/2039
$1,538
$899
$299,126
167
7/2039
$1,533
$904
$298,222
168
8/2039
$1,529
$909
$297,313
End of year 14
169
9/2039
$1,524
$913
$296,400
170
10/2039
$1,519
$918
$295,482
171
11/2039
$1,515
$923
$294,560
172
12/2039
$1,510
$927
$293,632
173
1/2040
$1,505
$932
$292,700
174
2/2040
$1,500
$937
$291,763
175
3/2040
$1,496
$942
$290,822
176
4/2040
$1,491
$946
$289,875
177
5/2040
$1,486
$951
$288,924
178
6/2040
$1,481
$956
$287,968
179
7/2040
$1,476
$961
$287,007
180
8/2040
$1,471
$966
$286,041
End of year 15
181
9/2040
$1,466
$971
$285,070
182
10/2040
$1,461
$976
$284,094
183
11/2040
$1,456
$981
$283,113
184
12/2040
$1,451
$986
$282,127
185
1/2041
$1,446
$991
$281,136
186
2/2041
$1,441
$996
$280,140
187
3/2041
$1,436
$1,001
$279,139
188
4/2041
$1,431
$1,006
$278,132
189
5/2041
$1,426
$1,012
$277,121
190
6/2041
$1,420
$1,017
$276,104
191
7/2041
$1,415
$1,022
$275,082
192
8/2041
$1,410
$1,027
$274,055
End of year 16
193
9/2041
$1,405
$1,032
$273,022
194
10/2041
$1,399
$1,038
$271,985
195
11/2041
$1,394
$1,043
$270,942
196
12/2041
$1,389
$1,048
$269,893
197
1/2042
$1,383
$1,054
$268,840
198
2/2042
$1,378
$1,059
$267,781
199
3/2042
$1,373
$1,065
$266,716
200
4/2042
$1,367
$1,070
$265,646
201
5/2042
$1,362
$1,076
$264,570
202
6/2042
$1,356
$1,081
$263,489
203
7/2042
$1,351
$1,087
$262,403
204
8/2042
$1,345
$1,092
$261,311
End of year 17
205
9/2042
$1,339
$1,098
$260,213
206
10/2042
$1,334
$1,103
$259,110
207
11/2042
$1,328
$1,109
$258,001
208
12/2042
$1,322
$1,115
$256,886
209
1/2043
$1,317
$1,120
$255,765
210
2/2043
$1,311
$1,126
$254,639
211
3/2043
$1,305
$1,132
$253,507
212
4/2043
$1,299
$1,138
$252,370
213
5/2043
$1,294
$1,144
$251,226
214
6/2043
$1,288
$1,149
$250,077
215
7/2043
$1,282
$1,155
$248,921
216
8/2043
$1,276
$1,161
$247,760
End of year 18
217
9/2043
$1,270
$1,167
$246,593
218
10/2043
$1,264
$1,173
$245,420
219
11/2043
$1,258
$1,179
$244,240
220
12/2043
$1,252
$1,185
$243,055
221
1/2044
$1,246
$1,191
$241,864
222
2/2044
$1,240
$1,197
$240,666
223
3/2044
$1,234
$1,204
$239,463
224
4/2044
$1,227
$1,210
$238,253
225
5/2044
$1,221
$1,216
$237,037
226
6/2044
$1,215
$1,222
$235,815
227
7/2044
$1,209
$1,228
$234,587
228
8/2044
$1,202
$1,235
$233,352
End of year 19
229
9/2044
$1,196
$1,241
$232,111
230
10/2044
$1,190
$1,247
$230,864
231
11/2044
$1,183
$1,254
$229,610
232
12/2044
$1,177
$1,260
$228,349
233
1/2045
$1,170
$1,267
$227,083
234
2/2045
$1,164
$1,273
$225,810
235
3/2045
$1,157
$1,280
$224,530
236
4/2045
$1,151
$1,286
$223,244
237
5/2045
$1,144
$1,293
$221,951
238
6/2045
$1,138
$1,299
$220,651
239
7/2045
$1,131
$1,306
$219,345
240
8/2045
$1,124
$1,313
$218,032
End of year 20
241
9/2045
$1,118
$1,320
$216,713
242
10/2045
$1,111
$1,326
$215,386
243
11/2045
$1,104
$1,333
$214,053
244
12/2045
$1,097
$1,340
$212,713
245
1/2046
$1,090
$1,347
$211,366
246
2/2046
$1,083
$1,354
$210,013
247
3/2046
$1,076
$1,361
$208,652
248
4/2046
$1,070
$1,368
$207,284
249
5/2046
$1,063
$1,375
$205,910
250
6/2046
$1,055
$1,382
$204,528
251
7/2046
$1,048
$1,389
$203,139
252
8/2046
$1,041
$1,396
$201,743
End of year 21
253
9/2046
$1,034
$1,403
$200,340
254
10/2046
$1,027
$1,410
$198,930
255
11/2046
$1,020
$1,417
$197,512
256
12/2046
$1,012
$1,425
$196,088
257
1/2047
$1,005
$1,432
$194,656
258
2/2047
$998
$1,439
$193,216
259
3/2047
$990
$1,447
$191,769
260
4/2047
$983
$1,454
$190,315
261
5/2047
$976
$1,462
$188,854
262
6/2047
$968
$1,469
$187,384
263
7/2047
$961
$1,477
$185,908
264
8/2047
$953
$1,484
$184,424
End of year 22
265
9/2047
$945
$1,492
$182,932
266
10/2047
$938
$1,499
$181,432
267
11/2047
$930
$1,507
$179,925
268
12/2047
$922
$1,515
$178,410
269
1/2048
$915
$1,523
$176,887
270
2/2048
$907
$1,530
$175,357
271
3/2048
$899
$1,538
$173,819
272
4/2048
$891
$1,546
$172,272
273
5/2048
$883
$1,554
$170,718
274
6/2048
$875
$1,562
$169,156
275
7/2048
$867
$1,570
$167,586
276
8/2048
$859
$1,578
$166,008
End of year 23
277
9/2048
$851
$1,586
$164,422
278
10/2048
$843
$1,594
$162,827
279
11/2048
$835
$1,603
$161,225
280
12/2048
$826
$1,611
$159,614
281
1/2049
$818
$1,619
$157,995
282
2/2049
$810
$1,627
$156,368
283
3/2049
$802
$1,636
$154,732
284
4/2049
$793
$1,644
$153,088
285
5/2049
$785
$1,652
$151,436
286
6/2049
$776
$1,661
$149,775
287
7/2049
$768
$1,669
$148,105
288
8/2049
$759
$1,678
$146,427
End of year 24
289
9/2049
$751
$1,687
$144,741
290
10/2049
$742
$1,695
$143,045
291
11/2049
$733
$1,704
$141,341
292
12/2049
$724
$1,713
$139,629
293
1/2050
$716
$1,721
$137,907
294
2/2050
$707
$1,730
$136,177
295
3/2050
$698
$1,739
$134,438
296
4/2050
$689
$1,748
$132,690
297
5/2050
$680
$1,757
$130,933
298
6/2050
$671
$1,766
$129,167
299
7/2050
$662
$1,775
$127,392
300
8/2050
$653
$1,784
$125,607
End of year 25
301
9/2050
$644
$1,793
$123,814
302
10/2050
$635
$1,803
$122,012
303
11/2050
$625
$1,812
$120,200
304
12/2050
$616
$1,821
$118,379
305
1/2051
$607
$1,830
$116,548
306
2/2051
$597
$1,840
$114,709
307
3/2051
$588
$1,849
$112,859
308
4/2051
$578
$1,859
$111,001
309
5/2051
$569
$1,868
$109,133
310
6/2051
$559
$1,878
$107,255
311
7/2051
$550
$1,887
$105,367
312
8/2051
$540
$1,897
$103,470
End of year 26
313
9/2051
$530
$1,907
$101,563
314
10/2051
$521
$1,917
$99,647
315
11/2051
$511
$1,926
$97,720
316
12/2051
$501
$1,936
$95,784
317
1/2052
$491
$1,946
$93,838
318
2/2052
$481
$1,956
$91,882
319
3/2052
$471
$1,966
$89,916
320
4/2052
$461
$1,976
$87,939
321
5/2052
$451
$1,986
$85,953
322
6/2052
$441
$1,997
$83,956
323
7/2052
$430
$2,007
$81,950
324
8/2052
$420
$2,017
$79,932
End of year 27
325
9/2052
$410
$2,027
$77,905
326
10/2052
$399
$2,038
$75,867
327
11/2052
$389
$2,048
$73,819
328
12/2052
$378
$2,059
$71,760
329
1/2053
$368
$2,069
$69,691
330
2/2053
$357
$2,080
$67,611
331
3/2053
$347
$2,091
$65,520
332
4/2053
$336
$2,101
$63,419
333
5/2053
$325
$2,112
$61,307
334
6/2053
$314
$2,123
$59,184
335
7/2053
$303
$2,134
$57,050
336
8/2053
$292
$2,145
$54,905
End of year 28
337
9/2053
$281
$2,156
$52,750
338
10/2053
$270
$2,167
$50,583
339
11/2053
$259
$2,178
$48,405
340
12/2053
$248
$2,189
$46,216
341
1/2054
$237
$2,200
$44,015
342
2/2054
$226
$2,212
$41,804
343
3/2054
$214
$2,223
$39,581
344
4/2054
$203
$2,234
$37,347
345
5/2054
$191
$2,246
$35,101
346
6/2054
$180
$2,257
$32,844
347
7/2054
$168
$2,269
$30,575
348
8/2054
$157
$2,280
$28,295
End of year 29
349
9/2054
$145
$2,292
$26,002
350
10/2054
$133
$2,304
$23,698
351
11/2054
$121
$2,316
$21,383
352
12/2054
$110
$2,328
$19,055
353
1/2055
$98
$2,339
$16,716
354
2/2055
$86
$2,351
$14,364
355
3/2055
$74
$2,364
$12,001
356
4/2055
$62
$2,376
$9,625
357
5/2055
$49
$2,388
$7,237
358
6/2055
$37
$2,400
$4,837
359
7/2055
$25
$2,412
$2,425
360
8/2055
$12
$2,425
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
9/25-8/26
$24,471
$4,775
$395,225
2
9/26-8/27
$24,169
$5,077
$390,147
3
9/27-8/28
$23,847
$5,399
$384,749
4
9/28-8/29
$23,506
$5,740
$379,009
5
9/29-8/30
$23,143
$6,103
$372,905
6
9/30-8/31
$22,756
$6,490
$366,416
7
9/31-8/32
$22,346
$6,900
$359,515
8
9/32-8/33
$21,909
$7,337
$352,179
9
9/33-8/34
$21,445
$7,801
$344,378
10
9/34-8/35
$20,951
$8,295
$336,083
11
9/35-8/36
$20,427
$8,819
$327,264
12
9/36-8/37
$19,869
$9,378
$317,886
13
9/37-8/38
$19,275
$9,971
$307,915
14
9/38-8/39
$18,644
$10,602
$297,313
15
9/39-8/40
$17,973
$11,273
$286,041
16
9/40-8/41
$17,260
$11,986
$274,055
17
9/41-8/42
$16,502
$12,744
$261,311
18
9/42-8/43
$15,695
$13,551
$247,760
19
9/43-8/44
$14,838
$14,408
$233,352
20
9/44-8/45
$13,926
$15,320
$218,032
21
9/45-8/46
$12,957
$16,289
$201,743
22
9/46-8/47
$11,926
$17,320
$184,424
23
9/47-8/48
$10,830
$18,416
$166,008
24
9/48-8/49
$9,665
$19,581
$146,427
25
9/49-8/50
$8,426
$20,820
$125,607
26
9/50-8/51
$7,109
$22,137
$103,470
27
9/51-8/52
$5,708
$23,538
$79,932
28
9/52-8/53
$4,219
$25,027
$54,905
29
9/53-8/54
$2,635
$26,611
$28,295
30
9/54-8/55
$952
$28,295
$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.