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: $2,507.79
Monthly
Total
Mortgage Payment
$2,507.79
$902,803.82
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
$3,632.79
$1,307,803.82
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$902,803.82
Total Interest
$502,803.82
Mortgage Payoff Date
Aug. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
08/2025
$2,141
$367
$399,633
2
9/2025
$2,139
$369
$399,264
3
10/2025
$2,137
$371
$398,893
4
11/2025
$2,135
$373
$398,520
5
12/2025
$2,133
$375
$398,145
6
1/2026
$2,131
$377
$397,768
7
2/2026
$2,129
$379
$397,389
8
3/2026
$2,127
$381
$397,007
9
4/2026
$2,125
$383
$396,624
10
5/2026
$2,123
$385
$396,239
11
6/2026
$2,121
$387
$395,852
12
7/2026
$2,118
$389
$395,463
End of year 1
13
8/2026
$2,116
$391
$395,071
14
9/2026
$2,114
$393
$394,678
15
10/2026
$2,112
$396
$394,282
16
11/2026
$2,110
$398
$393,884
17
12/2026
$2,108
$400
$393,484
18
1/2027
$2,106
$402
$393,082
19
2/2027
$2,104
$404
$392,678
20
3/2027
$2,101
$406
$392,272
21
4/2027
$2,099
$408
$391,864
22
5/2027
$2,097
$411
$391,453
23
6/2027
$2,095
$413
$391,040
24
7/2027
$2,093
$415
$390,625
End of year 2
25
8/2027
$2,090
$417
$390,208
26
9/2027
$2,088
$420
$389,788
27
10/2027
$2,086
$422
$389,366
28
11/2027
$2,084
$424
$388,942
29
12/2027
$2,081
$426
$388,516
30
1/2028
$2,079
$429
$388,087
31
2/2028
$2,077
$431
$387,657
32
3/2028
$2,075
$433
$387,223
33
4/2028
$2,072
$435
$386,788
34
5/2028
$2,070
$438
$386,350
35
6/2028
$2,068
$440
$385,910
36
7/2028
$2,065
$443
$385,467
End of year 3
37
8/2028
$2,063
$445
$385,022
38
9/2028
$2,061
$447
$384,575
39
10/2028
$2,058
$450
$384,126
40
11/2028
$2,056
$452
$383,673
41
12/2028
$2,053
$454
$383,219
42
1/2029
$2,051
$457
$382,762
43
2/2029
$2,048
$459
$382,303
44
3/2029
$2,046
$462
$381,841
45
4/2029
$2,043
$464
$381,376
46
5/2029
$2,041
$467
$380,910
47
6/2029
$2,039
$469
$380,440
48
7/2029
$2,036
$472
$379,969
End of year 4
49
8/2029
$2,033
$474
$379,494
50
9/2029
$2,031
$477
$379,017
51
10/2029
$2,028
$479
$378,538
52
11/2029
$2,026
$482
$378,056
53
12/2029
$2,023
$485
$377,571
54
1/2030
$2,021
$487
$377,084
55
2/2030
$2,018
$490
$376,595
56
3/2030
$2,015
$492
$376,102
57
4/2030
$2,013
$495
$375,607
58
5/2030
$2,010
$498
$375,110
59
6/2030
$2,007
$500
$374,609
60
7/2030
$2,005
$503
$374,106
End of year 5
61
8/2030
$2,002
$506
$373,600
62
9/2030
$1,999
$508
$373,092
63
10/2030
$1,997
$511
$372,581
64
11/2030
$1,994
$514
$372,067
65
12/2030
$1,991
$517
$371,550
66
1/2031
$1,988
$519
$371,031
67
2/2031
$1,986
$522
$370,509
68
3/2031
$1,983
$525
$369,984
69
4/2031
$1,980
$528
$369,456
70
5/2031
$1,977
$531
$368,926
71
6/2031
$1,974
$533
$368,392
72
7/2031
$1,972
$536
$367,856
End of year 6
73
8/2031
$1,969
$539
$367,317
74
9/2031
$1,966
$542
$366,775
75
10/2031
$1,963
$545
$366,230
76
11/2031
$1,960
$548
$365,682
77
12/2031
$1,957
$551
$365,131
78
1/2032
$1,954
$554
$364,578
79
2/2032
$1,951
$557
$364,021
80
3/2032
$1,948
$560
$363,461
81
4/2032
$1,945
$563
$362,898
82
5/2032
$1,942
$566
$362,333
83
6/2032
$1,939
$569
$361,764
84
7/2032
$1,936
$572
$361,192
End of year 7
85
8/2032
$1,933
$575
$360,618
86
9/2032
$1,930
$578
$360,040
87
10/2032
$1,927
$581
$359,459
88
11/2032
$1,924
$584
$358,875
89
12/2032
$1,921
$587
$358,287
90
1/2033
$1,917
$590
$357,697
91
2/2033
$1,914
$594
$357,104
92
3/2033
$1,911
$597
$356,507
93
4/2033
$1,908
$600
$355,907
94
5/2033
$1,905
$603
$355,304
95
6/2033
$1,901
$606
$354,698
96
7/2033
$1,898
$610
$354,088
End of year 8
97
8/2033
$1,895
$613
$353,475
98
9/2033
$1,892
$616
$352,859
99
10/2033
$1,888
$619
$352,240
100
11/2033
$1,885
$623
$351,617
101
12/2033
$1,882
$626
$350,991
102
1/2034
$1,878
$629
$350,361
103
2/2034
$1,875
$633
$349,729
104
3/2034
$1,872
$636
$349,093
105
4/2034
$1,868
$640
$348,453
106
5/2034
$1,865
$643
$347,810
107
6/2034
$1,861
$646
$347,164
108
7/2034
$1,858
$650
$346,514
End of year 9
109
8/2034
$1,854
$653
$345,860
110
9/2034
$1,851
$657
$345,203
111
10/2034
$1,847
$660
$344,543
112
11/2034
$1,844
$664
$343,879
113
12/2034
$1,840
$667
$343,212
114
1/2035
$1,837
$671
$342,541
115
2/2035
$1,833
$675
$341,866
116
3/2035
$1,830
$678
$341,188
117
4/2035
$1,826
$682
$340,506
118
5/2035
$1,822
$686
$339,820
119
6/2035
$1,819
$689
$339,131
120
7/2035
$1,815
$693
$338,438
End of year 10
121
8/2035
$1,811
$697
$337,742
122
9/2035
$1,807
$700
$337,042
123
10/2035
$1,804
$704
$336,337
124
11/2035
$1,800
$708
$335,630
125
12/2035
$1,796
$712
$334,918
126
1/2036
$1,792
$715
$334,203
127
2/2036
$1,789
$719
$333,483
128
3/2036
$1,785
$723
$332,760
129
4/2036
$1,781
$727
$332,033
130
5/2036
$1,777
$731
$331,302
131
6/2036
$1,773
$735
$330,568
132
7/2036
$1,769
$739
$329,829
End of year 11
133
8/2036
$1,765
$743
$329,086
134
9/2036
$1,761
$747
$328,340
135
10/2036
$1,757
$751
$327,589
136
11/2036
$1,753
$755
$326,834
137
12/2036
$1,749
$759
$326,076
138
1/2037
$1,745
$763
$325,313
139
2/2037
$1,741
$767
$324,546
140
3/2037
$1,737
$771
$323,775
141
4/2037
$1,733
$775
$323,000
142
5/2037
$1,729
$779
$322,221
143
6/2037
$1,724
$783
$321,438
144
7/2037
$1,720
$788
$320,650
End of year 12
145
8/2037
$1,716
$792
$319,858
146
9/2037
$1,712
$796
$319,062
147
10/2037
$1,708
$800
$318,262
148
11/2037
$1,703
$805
$317,457
149
12/2037
$1,699
$809
$316,649
150
1/2038
$1,695
$813
$315,835
151
2/2038
$1,690
$818
$315,018
152
3/2038
$1,686
$822
$314,196
153
4/2038
$1,681
$826
$313,370
154
5/2038
$1,677
$831
$312,539
155
6/2038
$1,673
$835
$311,704
156
7/2038
$1,668
$840
$310,864
End of year 13
157
8/2038
$1,664
$844
$310,020
158
9/2038
$1,659
$849
$309,171
159
10/2038
$1,655
$853
$308,318
160
11/2038
$1,650
$858
$307,460
161
12/2038
$1,645
$862
$306,598
162
1/2039
$1,641
$867
$305,731
163
2/2039
$1,636
$872
$304,859
164
3/2039
$1,632
$876
$303,983
165
4/2039
$1,627
$881
$303,102
166
5/2039
$1,622
$886
$302,216
167
6/2039
$1,617
$890
$301,326
168
7/2039
$1,613
$895
$300,431
End of year 14
169
8/2039
$1,608
$900
$299,531
170
9/2039
$1,603
$905
$298,626
171
10/2039
$1,598
$910
$297,716
172
11/2039
$1,593
$915
$296,802
173
12/2039
$1,588
$919
$295,882
174
1/2040
$1,583
$924
$294,958
175
2/2040
$1,579
$929
$294,029
176
3/2040
$1,574
$934
$293,095
177
4/2040
$1,569
$939
$292,155
178
5/2040
$1,564
$944
$291,211
179
6/2040
$1,558
$949
$290,262
180
7/2040
$1,553
$954
$289,307
End of year 15
181
8/2040
$1,548
$960
$288,348
182
9/2040
$1,543
$965
$287,383
183
10/2040
$1,538
$970
$286,413
184
11/2040
$1,533
$975
$285,438
185
12/2040
$1,528
$980
$284,458
186
1/2041
$1,522
$985
$283,473
187
2/2041
$1,517
$991
$282,482
188
3/2041
$1,512
$996
$281,486
189
4/2041
$1,506
$1,001
$280,485
190
5/2041
$1,501
$1,007
$279,478
191
6/2041
$1,496
$1,012
$278,466
192
7/2041
$1,490
$1,018
$277,448
End of year 16
193
8/2041
$1,485
$1,023
$276,425
194
9/2041
$1,479
$1,028
$275,397
195
10/2041
$1,474
$1,034
$274,363
196
11/2041
$1,468
$1,039
$273,323
197
12/2041
$1,463
$1,045
$272,278
198
1/2042
$1,457
$1,051
$271,228
199
2/2042
$1,452
$1,056
$270,171
200
3/2042
$1,446
$1,062
$269,109
201
4/2042
$1,440
$1,068
$268,042
202
5/2042
$1,434
$1,073
$266,968
203
6/2042
$1,429
$1,079
$265,889
204
7/2042
$1,423
$1,085
$264,805
End of year 17
205
8/2042
$1,417
$1,091
$263,714
206
9/2042
$1,411
$1,096
$262,617
207
10/2042
$1,405
$1,102
$261,515
208
11/2042
$1,400
$1,108
$260,407
209
12/2042
$1,394
$1,114
$259,293
210
1/2043
$1,388
$1,120
$258,172
211
2/2043
$1,382
$1,126
$257,046
212
3/2043
$1,376
$1,132
$255,914
213
4/2043
$1,370
$1,138
$254,776
214
5/2043
$1,363
$1,144
$253,632
215
6/2043
$1,357
$1,150
$252,481
216
7/2043
$1,351
$1,157
$251,325
End of year 18
217
8/2043
$1,345
$1,163
$250,162
218
9/2043
$1,339
$1,169
$248,993
219
10/2043
$1,333
$1,175
$247,818
220
11/2043
$1,326
$1,182
$246,636
221
12/2043
$1,320
$1,188
$245,448
222
1/2044
$1,314
$1,194
$244,254
223
2/2044
$1,307
$1,201
$243,053
224
3/2044
$1,301
$1,207
$241,846
225
4/2044
$1,294
$1,214
$240,633
226
5/2044
$1,288
$1,220
$239,413
227
6/2044
$1,281
$1,227
$238,186
228
7/2044
$1,275
$1,233
$236,953
End of year 19
229
8/2044
$1,268
$1,240
$235,713
230
9/2044
$1,261
$1,246
$234,467
231
10/2044
$1,255
$1,253
$233,214
232
11/2044
$1,248
$1,260
$231,954
233
12/2044
$1,241
$1,266
$230,688
234
1/2045
$1,235
$1,273
$229,415
235
2/2045
$1,228
$1,280
$228,135
236
3/2045
$1,221
$1,287
$226,848
237
4/2045
$1,214
$1,294
$225,554
238
5/2045
$1,207
$1,301
$224,253
239
6/2045
$1,200
$1,308
$222,946
240
7/2045
$1,193
$1,315
$221,631
End of year 20
241
8/2045
$1,186
$1,322
$220,309
242
9/2045
$1,179
$1,329
$218,981
243
10/2045
$1,172
$1,336
$217,645
244
11/2045
$1,165
$1,343
$216,302
245
12/2045
$1,158
$1,350
$214,951
246
1/2046
$1,150
$1,357
$213,594
247
2/2046
$1,143
$1,365
$212,229
248
3/2046
$1,136
$1,372
$210,857
249
4/2046
$1,128
$1,379
$209,478
250
5/2046
$1,121
$1,387
$208,091
251
6/2046
$1,114
$1,394
$206,697
252
7/2046
$1,106
$1,402
$205,295
End of year 21
253
8/2046
$1,099
$1,409
$203,886
254
9/2046
$1,091
$1,417
$202,470
255
10/2046
$1,084
$1,424
$201,045
256
11/2046
$1,076
$1,432
$199,614
257
12/2046
$1,068
$1,440
$198,174
258
1/2047
$1,061
$1,447
$196,727
259
2/2047
$1,053
$1,455
$195,272
260
3/2047
$1,045
$1,463
$193,809
261
4/2047
$1,037
$1,471
$192,338
262
5/2047
$1,029
$1,478
$190,860
263
6/2047
$1,021
$1,486
$189,374
264
7/2047
$1,013
$1,494
$187,879
End of year 22
265
8/2047
$1,005
$1,502
$186,377
266
9/2047
$997
$1,510
$184,867
267
10/2047
$989
$1,518
$183,348
268
11/2047
$981
$1,527
$181,822
269
12/2047
$973
$1,535
$180,287
270
1/2048
$965
$1,543
$178,744
271
2/2048
$957
$1,551
$177,193
272
3/2048
$948
$1,560
$175,633
273
4/2048
$940
$1,568
$174,065
274
5/2048
$932
$1,576
$172,489
275
6/2048
$923
$1,585
$170,904
276
7/2048
$915
$1,593
$169,311
End of year 23
277
8/2048
$906
$1,602
$167,710
278
9/2048
$898
$1,610
$166,099
279
10/2048
$889
$1,619
$164,480
280
11/2048
$880
$1,628
$162,853
281
12/2048
$872
$1,636
$161,217
282
1/2049
$863
$1,645
$159,572
283
2/2049
$854
$1,654
$157,918
284
3/2049
$845
$1,663
$156,255
285
4/2049
$836
$1,672
$154,584
286
5/2049
$827
$1,681
$152,903
287
6/2049
$818
$1,690
$151,214
288
7/2049
$809
$1,699
$149,515
End of year 24
289
8/2049
$800
$1,708
$147,807
290
9/2049
$791
$1,717
$146,091
291
10/2049
$782
$1,726
$144,365
292
11/2049
$773
$1,735
$142,629
293
12/2049
$763
$1,744
$140,885
294
1/2050
$754
$1,754
$139,131
295
2/2050
$745
$1,763
$137,368
296
3/2050
$735
$1,773
$135,595
297
4/2050
$726
$1,782
$133,813
298
5/2050
$716
$1,792
$132,022
299
6/2050
$707
$1,801
$130,220
300
7/2050
$697
$1,811
$128,409
End of year 25
301
8/2050
$687
$1,821
$126,589
302
9/2050
$677
$1,830
$124,758
303
10/2050
$668
$1,840
$122,918
304
11/2050
$658
$1,850
$121,068
305
12/2050
$648
$1,860
$119,209
306
1/2051
$638
$1,870
$117,339
307
2/2051
$628
$1,880
$115,459
308
3/2051
$618
$1,890
$113,569
309
4/2051
$608
$1,900
$111,669
310
5/2051
$598
$1,910
$109,759
311
6/2051
$587
$1,920
$107,838
312
7/2051
$577
$1,931
$105,908
End of year 26
313
8/2051
$567
$1,941
$103,967
314
9/2051
$556
$1,951
$102,015
315
10/2051
$546
$1,962
$100,053
316
11/2051
$535
$1,972
$98,081
317
12/2051
$525
$1,983
$96,098
318
1/2052
$514
$1,994
$94,105
319
2/2052
$504
$2,004
$92,101
320
3/2052
$493
$2,015
$90,086
321
4/2052
$482
$2,026
$88,060
322
5/2052
$471
$2,037
$86,023
323
6/2052
$460
$2,047
$83,976
324
7/2052
$449
$2,058
$81,918
End of year 27
325
8/2052
$438
$2,069
$79,848
326
9/2052
$427
$2,080
$77,768
327
10/2052
$416
$2,092
$75,676
328
11/2052
$405
$2,103
$73,573
329
12/2052
$394
$2,114
$71,459
330
1/2053
$382
$2,125
$69,334
331
2/2053
$371
$2,137
$67,197
332
3/2053
$360
$2,148
$65,049
333
4/2053
$348
$2,160
$62,889
334
5/2053
$337
$2,171
$60,718
335
6/2053
$325
$2,183
$58,535
336
7/2053
$313
$2,195
$56,341
End of year 28
337
8/2053
$302
$2,206
$54,135
338
9/2053
$290
$2,218
$51,917
339
10/2053
$278
$2,230
$49,687
340
11/2053
$266
$2,242
$47,445
341
12/2053
$254
$2,254
$45,191
342
1/2054
$242
$2,266
$42,925
343
2/2054
$230
$2,278
$40,647
344
3/2054
$218
$2,290
$38,357
345
4/2054
$205
$2,303
$36,054
346
5/2054
$193
$2,315
$33,739
347
6/2054
$181
$2,327
$31,412
348
7/2054
$168
$2,340
$29,072
End of year 29
349
8/2054
$156
$2,352
$26,720
350
9/2054
$143
$2,365
$24,355
351
10/2054
$130
$2,377
$21,978
352
11/2054
$118
$2,390
$19,588
353
12/2054
$105
$2,403
$17,185
354
1/2055
$92
$2,416
$14,769
355
2/2055
$79
$2,429
$12,340
356
3/2055
$66
$2,442
$9,898
357
4/2055
$53
$2,455
$7,444
358
5/2055
$40
$2,468
$4,976
359
6/2055
$27
$2,481
$2,494
360
7/2055
$13
$2,494
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
8/25-7/26
$25,556
$4,537
$395,463
2
8/26-7/27
$25,256
$4,838
$390,625
3
8/27-7/28
$24,936
$5,158
$385,467
4
8/28-7/29
$24,595
$5,499
$379,969
5
8/29-7/30
$24,231
$5,862
$374,106
6
8/30-7/31
$23,843
$6,250
$367,856
7
8/31-7/32
$23,430
$6,664
$361,192
8
8/32-7/33
$22,989
$7,104
$354,088
9
8/33-7/34
$22,519
$7,574
$346,514
10
8/34-7/35
$22,018
$8,075
$338,438
11
8/35-7/36
$21,484
$8,609
$329,829
12
8/36-7/37
$20,915
$9,179
$320,650
13
8/37-7/38
$20,307
$9,786
$310,864
14
8/38-7/39
$19,660
$10,433
$300,431
15
8/39-7/40
$18,970
$11,123
$289,307
16
8/40-7/41
$18,234
$11,859
$277,448
17
8/41-7/42
$17,450
$12,644
$264,805
18
8/42-7/43
$16,614
$13,480
$251,325
19
8/43-7/44
$15,722
$14,372
$236,953
20
8/44-7/45
$14,771
$15,322
$221,631
21
8/45-7/46
$13,758
$16,336
$205,295
22
8/46-7/47
$12,677
$17,416
$187,879
23
8/47-7/48
$11,525
$18,568
$169,311
24
8/48-7/49
$10,297
$19,796
$149,515
25
8/49-7/50
$8,988
$21,106
$128,409
26
8/50-7/51
$7,592
$22,502
$105,908
27
8/51-7/52
$6,103
$23,990
$81,918
28
8/52-7/53
$4,517
$25,577
$56,341
29
8/53-7/54
$2,825
$27,269
$29,072
30
8/54-7/55
$1,021
$29,072
$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.