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: $2,533.27
Monthly
Total
Mortgage Payment
$2,533.27
$911,978.03
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
$3,658.27
$1,316,978.03
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$911,978.03
Total Interest
$511,978.03
Mortgage Payoff Date
Aug. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
08/2025
$2,173
$360
$399,640
2
9/2025
$2,171
$362
$399,277
3
10/2025
$2,169
$364
$398,913
4
11/2025
$2,167
$366
$398,547
5
12/2025
$2,165
$368
$398,179
6
1/2026
$2,163
$370
$397,809
7
2/2026
$2,161
$372
$397,437
8
3/2026
$2,159
$374
$397,062
9
4/2026
$2,157
$376
$396,686
10
5/2026
$2,155
$378
$396,308
11
6/2026
$2,153
$380
$395,928
12
7/2026
$2,151
$382
$395,545
End of year 1
13
8/2026
$2,149
$384
$395,161
14
9/2026
$2,147
$387
$394,774
15
10/2026
$2,145
$389
$394,385
16
11/2026
$2,142
$391
$393,995
17
12/2026
$2,140
$393
$393,602
18
1/2027
$2,138
$395
$393,207
19
2/2027
$2,136
$397
$392,810
20
3/2027
$2,134
$399
$392,410
21
4/2027
$2,132
$402
$392,009
22
5/2027
$2,130
$404
$391,605
23
6/2027
$2,127
$406
$391,199
24
7/2027
$2,125
$408
$390,791
End of year 2
25
8/2027
$2,123
$410
$390,381
26
9/2027
$2,121
$413
$389,968
27
10/2027
$2,119
$415
$389,554
28
11/2027
$2,116
$417
$389,137
29
12/2027
$2,114
$419
$388,717
30
1/2028
$2,112
$422
$388,296
31
2/2028
$2,109
$424
$387,872
32
3/2028
$2,107
$426
$387,446
33
4/2028
$2,105
$428
$387,017
34
5/2028
$2,102
$431
$386,586
35
6/2028
$2,100
$433
$386,153
36
7/2028
$2,098
$435
$385,718
End of year 3
37
8/2028
$2,095
$438
$385,280
38
9/2028
$2,093
$440
$384,840
39
10/2028
$2,091
$443
$384,397
40
11/2028
$2,088
$445
$383,952
41
12/2028
$2,086
$447
$383,505
42
1/2029
$2,083
$450
$383,055
43
2/2029
$2,081
$452
$382,602
44
3/2029
$2,078
$455
$382,148
45
4/2029
$2,076
$457
$381,690
46
5/2029
$2,074
$460
$381,231
47
6/2029
$2,071
$462
$380,768
48
7/2029
$2,069
$465
$380,304
End of year 4
49
8/2029
$2,066
$467
$379,836
50
9/2029
$2,063
$470
$379,366
51
10/2029
$2,061
$472
$378,894
52
11/2029
$2,058
$475
$378,419
53
12/2029
$2,056
$478
$377,942
54
1/2030
$2,053
$480
$377,462
55
2/2030
$2,051
$483
$376,979
56
3/2030
$2,048
$485
$376,493
57
4/2030
$2,045
$488
$376,006
58
5/2030
$2,043
$491
$375,515
59
6/2030
$2,040
$493
$375,022
60
7/2030
$2,037
$496
$374,526
End of year 5
61
8/2030
$2,035
$499
$374,027
62
9/2030
$2,032
$501
$373,526
63
10/2030
$2,029
$504
$373,022
64
11/2030
$2,026
$507
$372,515
65
12/2030
$2,024
$510
$372,005
66
1/2031
$2,021
$512
$371,493
67
2/2031
$2,018
$515
$370,978
68
3/2031
$2,015
$518
$370,460
69
4/2031
$2,013
$521
$369,939
70
5/2031
$2,010
$524
$369,415
71
6/2031
$2,007
$526
$368,889
72
7/2031
$2,004
$529
$368,360
End of year 6
73
8/2031
$2,001
$532
$367,827
74
9/2031
$1,998
$535
$367,292
75
10/2031
$1,995
$538
$366,754
76
11/2031
$1,992
$541
$366,214
77
12/2031
$1,989
$544
$365,670
78
1/2032
$1,987
$547
$365,123
79
2/2032
$1,984
$550
$364,573
80
3/2032
$1,981
$553
$364,021
81
4/2032
$1,978
$556
$363,465
82
5/2032
$1,975
$559
$362,906
83
6/2032
$1,971
$562
$362,344
84
7/2032
$1,968
$565
$361,779
End of year 7
85
8/2032
$1,965
$568
$361,212
86
9/2032
$1,962
$571
$360,641
87
10/2032
$1,959
$574
$360,066
88
11/2032
$1,956
$577
$359,489
89
12/2032
$1,953
$580
$358,909
90
1/2033
$1,950
$583
$358,325
91
2/2033
$1,947
$587
$357,739
92
3/2033
$1,943
$590
$357,149
93
4/2033
$1,940
$593
$356,556
94
5/2033
$1,937
$596
$355,960
95
6/2033
$1,934
$600
$355,360
96
7/2033
$1,930
$603
$354,757
End of year 8
97
8/2033
$1,927
$606
$354,151
98
9/2033
$1,924
$609
$353,542
99
10/2033
$1,921
$613
$352,929
100
11/2033
$1,917
$616
$352,313
101
12/2033
$1,914
$619
$351,694
102
1/2034
$1,911
$623
$351,071
103
2/2034
$1,907
$626
$350,445
104
3/2034
$1,904
$629
$349,816
105
4/2034
$1,900
$633
$349,183
106
5/2034
$1,897
$636
$348,546
107
6/2034
$1,893
$640
$347,907
108
7/2034
$1,890
$643
$347,263
End of year 9
109
8/2034
$1,887
$647
$346,617
110
9/2034
$1,883
$650
$345,966
111
10/2034
$1,879
$654
$345,312
112
11/2034
$1,876
$657
$344,655
113
12/2034
$1,872
$661
$343,994
114
1/2035
$1,869
$665
$343,330
115
2/2035
$1,865
$668
$342,661
116
3/2035
$1,862
$672
$341,990
117
4/2035
$1,858
$675
$341,314
118
5/2035
$1,854
$679
$340,635
119
6/2035
$1,851
$683
$339,952
120
7/2035
$1,847
$686
$339,266
End of year 10
121
8/2035
$1,843
$690
$338,576
122
9/2035
$1,839
$694
$337,882
123
10/2035
$1,836
$698
$337,184
124
11/2035
$1,832
$702
$336,483
125
12/2035
$1,828
$705
$335,777
126
1/2036
$1,824
$709
$335,068
127
2/2036
$1,820
$713
$334,355
128
3/2036
$1,816
$717
$333,638
129
4/2036
$1,812
$721
$332,917
130
5/2036
$1,809
$725
$332,193
131
6/2036
$1,805
$729
$331,464
132
7/2036
$1,801
$733
$330,731
End of year 11
133
8/2036
$1,797
$737
$329,995
134
9/2036
$1,793
$741
$329,254
135
10/2036
$1,789
$745
$328,510
136
11/2036
$1,785
$749
$327,761
137
12/2036
$1,781
$753
$327,008
138
1/2037
$1,776
$757
$326,252
139
2/2037
$1,772
$761
$325,491
140
3/2037
$1,768
$765
$324,726
141
4/2037
$1,764
$769
$323,956
142
5/2037
$1,760
$773
$323,183
143
6/2037
$1,756
$778
$322,405
144
7/2037
$1,751
$782
$321,624
End of year 12
145
8/2037
$1,747
$786
$320,838
146
9/2037
$1,743
$790
$320,047
147
10/2037
$1,739
$795
$319,253
148
11/2037
$1,734
$799
$318,454
149
12/2037
$1,730
$803
$317,650
150
1/2038
$1,726
$808
$316,843
151
2/2038
$1,721
$812
$316,031
152
3/2038
$1,717
$816
$315,214
153
4/2038
$1,712
$821
$314,393
154
5/2038
$1,708
$825
$313,568
155
6/2038
$1,703
$830
$312,738
156
7/2038
$1,699
$834
$311,904
End of year 13
157
8/2038
$1,694
$839
$311,065
158
9/2038
$1,690
$843
$310,222
159
10/2038
$1,685
$848
$309,374
160
11/2038
$1,681
$853
$308,521
161
12/2038
$1,676
$857
$307,664
162
1/2039
$1,671
$862
$306,802
163
2/2039
$1,667
$867
$305,935
164
3/2039
$1,662
$871
$305,064
165
4/2039
$1,657
$876
$304,188
166
5/2039
$1,653
$881
$303,307
167
6/2039
$1,648
$886
$302,422
168
7/2039
$1,643
$890
$301,531
End of year 14
169
8/2039
$1,638
$895
$300,636
170
9/2039
$1,633
$900
$299,736
171
10/2039
$1,628
$905
$298,831
172
11/2039
$1,623
$910
$297,921
173
12/2039
$1,618
$915
$297,007
174
1/2040
$1,613
$920
$296,087
175
2/2040
$1,608
$925
$295,162
176
3/2040
$1,603
$930
$294,232
177
4/2040
$1,598
$935
$293,297
178
5/2040
$1,593
$940
$292,357
179
6/2040
$1,588
$945
$291,412
180
7/2040
$1,583
$950
$290,462
End of year 15
181
8/2040
$1,578
$955
$289,507
182
9/2040
$1,573
$961
$288,546
183
10/2040
$1,568
$966
$287,581
184
11/2040
$1,562
$971
$286,610
185
12/2040
$1,557
$976
$285,633
186
1/2041
$1,552
$982
$284,652
187
2/2041
$1,546
$987
$283,665
188
3/2041
$1,541
$992
$282,673
189
4/2041
$1,536
$998
$281,675
190
5/2041
$1,530
$1,003
$280,672
191
6/2041
$1,525
$1,009
$279,663
192
7/2041
$1,519
$1,014
$278,649
End of year 16
193
8/2041
$1,514
$1,020
$277,630
194
9/2041
$1,508
$1,025
$276,605
195
10/2041
$1,503
$1,031
$275,574
196
11/2041
$1,497
$1,036
$274,538
197
12/2041
$1,491
$1,042
$273,496
198
1/2042
$1,486
$1,048
$272,449
199
2/2042
$1,480
$1,053
$271,395
200
3/2042
$1,474
$1,059
$270,336
201
4/2042
$1,469
$1,065
$269,272
202
5/2042
$1,463
$1,070
$268,201
203
6/2042
$1,457
$1,076
$267,125
204
7/2042
$1,451
$1,082
$266,043
End of year 17
205
8/2042
$1,445
$1,088
$264,955
206
9/2042
$1,439
$1,094
$263,861
207
10/2042
$1,433
$1,100
$262,761
208
11/2042
$1,427
$1,106
$261,655
209
12/2042
$1,421
$1,112
$260,544
210
1/2043
$1,415
$1,118
$259,426
211
2/2043
$1,409
$1,124
$258,302
212
3/2043
$1,403
$1,130
$257,172
213
4/2043
$1,397
$1,136
$256,036
214
5/2043
$1,391
$1,142
$254,893
215
6/2043
$1,385
$1,149
$253,745
216
7/2043
$1,378
$1,155
$252,590
End of year 18
217
8/2043
$1,372
$1,161
$251,429
218
9/2043
$1,366
$1,167
$250,261
219
10/2043
$1,360
$1,174
$249,088
220
11/2043
$1,353
$1,180
$247,908
221
12/2043
$1,347
$1,187
$246,721
222
1/2044
$1,340
$1,193
$245,528
223
2/2044
$1,334
$1,199
$244,329
224
3/2044
$1,327
$1,206
$243,123
225
4/2044
$1,321
$1,213
$241,910
226
5/2044
$1,314
$1,219
$240,691
227
6/2044
$1,308
$1,226
$239,465
228
7/2044
$1,301
$1,232
$238,233
End of year 19
229
8/2044
$1,294
$1,239
$236,994
230
9/2044
$1,287
$1,246
$235,748
231
10/2044
$1,281
$1,253
$234,495
232
11/2044
$1,274
$1,259
$233,236
233
12/2044
$1,267
$1,266
$231,970
234
1/2045
$1,260
$1,273
$230,697
235
2/2045
$1,253
$1,280
$229,417
236
3/2045
$1,246
$1,287
$228,130
237
4/2045
$1,239
$1,294
$226,836
238
5/2045
$1,232
$1,301
$225,535
239
6/2045
$1,225
$1,308
$224,227
240
7/2045
$1,218
$1,315
$222,912
End of year 20
241
8/2045
$1,211
$1,322
$221,589
242
9/2045
$1,204
$1,329
$220,260
243
10/2045
$1,197
$1,337
$218,923
244
11/2045
$1,189
$1,344
$217,579
245
12/2045
$1,182
$1,351
$216,228
246
1/2046
$1,175
$1,359
$214,869
247
2/2046
$1,167
$1,366
$213,503
248
3/2046
$1,160
$1,373
$212,130
249
4/2046
$1,152
$1,381
$210,749
250
5/2046
$1,145
$1,388
$209,361
251
6/2046
$1,137
$1,396
$207,965
252
7/2046
$1,130
$1,404
$206,561
End of year 21
253
8/2046
$1,122
$1,411
$205,150
254
9/2046
$1,114
$1,419
$203,731
255
10/2046
$1,107
$1,427
$202,305
256
11/2046
$1,099
$1,434
$200,871
257
12/2046
$1,091
$1,442
$199,428
258
1/2047
$1,083
$1,450
$197,979
259
2/2047
$1,076
$1,458
$196,521
260
3/2047
$1,068
$1,466
$195,055
261
4/2047
$1,060
$1,474
$193,582
262
5/2047
$1,052
$1,482
$192,100
263
6/2047
$1,044
$1,490
$190,610
264
7/2047
$1,035
$1,498
$189,112
End of year 22
265
8/2047
$1,027
$1,506
$187,607
266
9/2047
$1,019
$1,514
$186,092
267
10/2047
$1,011
$1,522
$184,570
268
11/2047
$1,003
$1,531
$183,039
269
12/2047
$994
$1,539
$181,501
270
1/2048
$986
$1,547
$179,953
271
2/2048
$978
$1,556
$178,398
272
3/2048
$969
$1,564
$176,834
273
4/2048
$961
$1,573
$175,261
274
5/2048
$952
$1,581
$173,680
275
6/2048
$944
$1,590
$172,090
276
7/2048
$935
$1,598
$170,492
End of year 23
277
8/2048
$926
$1,607
$168,884
278
9/2048
$917
$1,616
$167,269
279
10/2048
$909
$1,625
$165,644
280
11/2048
$900
$1,633
$164,011
281
12/2048
$891
$1,642
$162,368
282
1/2049
$882
$1,651
$160,717
283
2/2049
$873
$1,660
$159,057
284
3/2049
$864
$1,669
$157,388
285
4/2049
$855
$1,678
$155,710
286
5/2049
$846
$1,687
$154,022
287
6/2049
$837
$1,697
$152,326
288
7/2049
$828
$1,706
$150,620
End of year 24
289
8/2049
$818
$1,715
$148,905
290
9/2049
$809
$1,724
$147,181
291
10/2049
$800
$1,734
$145,447
292
11/2049
$790
$1,743
$143,704
293
12/2049
$781
$1,753
$141,951
294
1/2050
$771
$1,762
$140,189
295
2/2050
$762
$1,772
$138,417
296
3/2050
$752
$1,781
$136,636
297
4/2050
$742
$1,791
$134,845
298
5/2050
$733
$1,801
$133,044
299
6/2050
$723
$1,811
$131,234
300
7/2050
$713
$1,820
$129,413
End of year 25
301
8/2050
$703
$1,830
$127,583
302
9/2050
$693
$1,840
$125,743
303
10/2050
$683
$1,850
$123,893
304
11/2050
$673
$1,860
$122,033
305
12/2050
$663
$1,870
$120,162
306
1/2051
$653
$1,880
$118,282
307
2/2051
$643
$1,891
$116,391
308
3/2051
$632
$1,901
$114,490
309
4/2051
$622
$1,911
$112,579
310
5/2051
$612
$1,922
$110,657
311
6/2051
$601
$1,932
$108,725
312
7/2051
$591
$1,943
$106,782
End of year 26
313
8/2051
$580
$1,953
$104,829
314
9/2051
$569
$1,964
$102,865
315
10/2051
$559
$1,974
$100,891
316
11/2051
$548
$1,985
$98,906
317
12/2051
$537
$1,996
$96,910
318
1/2052
$526
$2,007
$94,903
319
2/2052
$516
$2,018
$92,885
320
3/2052
$505
$2,029
$90,856
321
4/2052
$494
$2,040
$88,817
322
5/2052
$482
$2,051
$86,766
323
6/2052
$471
$2,062
$84,704
324
7/2052
$460
$2,073
$82,631
End of year 27
325
8/2052
$449
$2,084
$80,547
326
9/2052
$438
$2,096
$78,451
327
10/2052
$426
$2,107
$76,344
328
11/2052
$415
$2,119
$74,225
329
12/2052
$403
$2,130
$72,095
330
1/2053
$392
$2,142
$69,954
331
2/2053
$380
$2,153
$67,800
332
3/2053
$368
$2,165
$65,635
333
4/2053
$357
$2,177
$63,459
334
5/2053
$345
$2,189
$61,270
335
6/2053
$333
$2,200
$59,070
336
7/2053
$321
$2,212
$56,857
End of year 28
337
8/2053
$309
$2,224
$54,633
338
9/2053
$297
$2,236
$52,397
339
10/2053
$285
$2,249
$50,148
340
11/2053
$272
$2,261
$47,887
341
12/2053
$260
$2,273
$45,614
342
1/2054
$248
$2,285
$43,328
343
2/2054
$235
$2,298
$41,031
344
3/2054
$223
$2,310
$38,720
345
4/2054
$210
$2,323
$36,397
346
5/2054
$198
$2,336
$34,062
347
6/2054
$185
$2,348
$31,713
348
7/2054
$172
$2,361
$29,353
End of year 29
349
8/2054
$159
$2,374
$26,979
350
9/2054
$147
$2,387
$24,592
351
10/2054
$134
$2,400
$22,192
352
11/2054
$121
$2,413
$19,780
353
12/2054
$107
$2,426
$17,354
354
1/2055
$94
$2,439
$14,915
355
2/2055
$81
$2,452
$12,463
356
3/2055
$68
$2,466
$9,997
357
4/2055
$54
$2,479
$7,518
358
5/2055
$41
$2,492
$5,026
359
6/2055
$27
$2,506
$2,520
360
7/2055
$14
$2,520
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
8/25-7/26
$25,944
$4,455
$395,545
2
8/26-7/27
$25,645
$4,754
$390,791
3
8/27-7/28
$25,326
$5,073
$385,718
4
8/28-7/29
$24,985
$5,414
$380,304
5
8/29-7/30
$24,621
$5,778
$374,526
6
8/30-7/31
$24,233
$6,166
$368,360
7
8/31-7/32
$23,819
$6,580
$361,779
8
8/32-7/33
$23,377
$7,022
$354,757
9
8/33-7/34
$22,905
$7,494
$347,263
10
8/34-7/35
$22,402
$7,997
$339,266
11
8/35-7/36
$21,865
$8,535
$330,731
12
8/36-7/37
$21,291
$9,108
$321,624
13
8/37-7/38
$20,680
$9,720
$311,904
14
8/38-7/39
$20,027
$10,373
$301,531
15
8/39-7/40
$19,330
$11,069
$290,462
16
8/40-7/41
$18,586
$11,813
$278,649
17
8/41-7/42
$17,793
$12,606
$266,043
18
8/42-7/43
$16,946
$13,453
$252,590
19
8/43-7/44
$16,042
$14,357
$238,233
20
8/44-7/45
$15,078
$15,321
$222,912
21
8/45-7/46
$14,049
$16,350
$206,561
22
8/46-7/47
$12,950
$17,449
$189,112
23
8/47-7/48
$11,778
$18,621
$170,492
24
8/48-7/49
$10,528
$19,872
$150,620
25
8/49-7/50
$9,193
$21,207
$129,413
26
8/50-7/51
$7,768
$22,631
$106,782
27
8/51-7/52
$6,248
$24,151
$82,631
28
8/52-7/53
$4,626
$25,774
$56,857
29
8/53-7/54
$2,894
$27,505
$29,353
30
8/54-7/55
$1,047
$29,353
$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.