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: $2,455.07
Monthly
Total
Mortgage Payment
$2,455.07
$883,825.03
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
$3,580.07
$1,288,825.03
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$883,825.03
Total Interest
$483,825.03
Mortgage Payoff Date
Sep. 2054
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
09/2024
$2,073
$382
$399,618
2
10/2024
$2,071
$384
$399,235
3
11/2024
$2,069
$386
$398,849
4
12/2024
$2,067
$388
$398,461
5
1/2025
$2,065
$390
$398,071
6
2/2025
$2,063
$392
$397,680
7
3/2025
$2,061
$394
$397,286
8
4/2025
$2,059
$396
$396,890
9
5/2025
$2,057
$398
$396,492
10
6/2025
$2,055
$400
$396,092
11
7/2025
$2,053
$402
$395,690
12
8/2025
$2,051
$404
$395,286
End of year 1
13
9/2025
$2,049
$406
$394,880
14
10/2025
$2,047
$408
$394,472
15
11/2025
$2,045
$410
$394,061
16
12/2025
$2,043
$413
$393,649
17
1/2026
$2,040
$415
$393,234
18
2/2026
$2,038
$417
$392,817
19
3/2026
$2,036
$419
$392,399
20
4/2026
$2,034
$421
$391,977
21
5/2026
$2,032
$423
$391,554
22
6/2026
$2,030
$426
$391,129
23
7/2026
$2,027
$428
$390,701
24
8/2026
$2,025
$430
$390,271
End of year 2
25
9/2026
$2,023
$432
$389,839
26
10/2026
$2,021
$434
$389,404
27
11/2026
$2,018
$437
$388,968
28
12/2026
$2,016
$439
$388,529
29
1/2027
$2,014
$441
$388,088
30
2/2027
$2,012
$443
$387,644
31
3/2027
$2,009
$446
$387,198
32
4/2027
$2,007
$448
$386,750
33
5/2027
$2,005
$450
$386,300
34
6/2027
$2,002
$453
$385,847
35
7/2027
$2,000
$455
$385,392
36
8/2027
$1,998
$457
$384,934
End of year 3
37
9/2027
$1,995
$460
$384,475
38
10/2027
$1,993
$462
$384,012
39
11/2027
$1,990
$465
$383,548
40
12/2027
$1,988
$467
$383,081
41
1/2028
$1,986
$469
$382,611
42
2/2028
$1,983
$472
$382,140
43
3/2028
$1,981
$474
$381,665
44
4/2028
$1,978
$477
$381,188
45
5/2028
$1,976
$479
$380,709
46
6/2028
$1,973
$482
$380,227
47
7/2028
$1,971
$484
$379,743
48
8/2028
$1,968
$487
$379,257
End of year 4
49
9/2028
$1,966
$489
$378,767
50
10/2028
$1,963
$492
$378,275
51
11/2028
$1,961
$494
$377,781
52
12/2028
$1,958
$497
$377,284
53
1/2029
$1,956
$499
$376,785
54
2/2029
$1,953
$502
$376,283
55
3/2029
$1,950
$505
$375,778
56
4/2029
$1,948
$507
$375,271
57
5/2029
$1,945
$510
$374,761
58
6/2029
$1,943
$513
$374,248
59
7/2029
$1,940
$515
$373,733
60
8/2029
$1,937
$518
$373,215
End of year 5
61
9/2029
$1,934
$521
$372,695
62
10/2029
$1,932
$523
$372,171
63
11/2029
$1,929
$526
$371,645
64
12/2029
$1,926
$529
$371,117
65
1/2030
$1,924
$531
$370,585
66
2/2030
$1,921
$534
$370,051
67
3/2030
$1,918
$537
$369,514
68
4/2030
$1,915
$540
$368,974
69
5/2030
$1,913
$543
$368,432
70
6/2030
$1,910
$545
$367,886
71
7/2030
$1,907
$548
$367,338
72
8/2030
$1,904
$551
$366,787
End of year 6
73
9/2030
$1,901
$554
$366,233
74
10/2030
$1,898
$557
$365,676
75
11/2030
$1,895
$560
$365,117
76
12/2030
$1,893
$563
$364,554
77
1/2031
$1,890
$565
$363,989
78
2/2031
$1,887
$568
$363,420
79
3/2031
$1,884
$571
$362,849
80
4/2031
$1,881
$574
$362,275
81
5/2031
$1,878
$577
$361,697
82
6/2031
$1,875
$580
$361,117
83
7/2031
$1,872
$583
$360,534
84
8/2031
$1,869
$586
$359,948
End of year 7
85
9/2031
$1,866
$589
$359,358
86
10/2031
$1,863
$592
$358,766
87
11/2031
$1,860
$595
$358,170
88
12/2031
$1,857
$599
$357,572
89
1/2032
$1,853
$602
$356,970
90
2/2032
$1,850
$605
$356,365
91
3/2032
$1,847
$608
$355,757
92
4/2032
$1,844
$611
$355,146
93
5/2032
$1,841
$614
$354,532
94
6/2032
$1,838
$617
$353,915
95
7/2032
$1,834
$621
$353,294
96
8/2032
$1,831
$624
$352,670
End of year 8
97
9/2032
$1,828
$627
$352,043
98
10/2032
$1,825
$630
$351,413
99
11/2032
$1,821
$634
$350,779
100
12/2032
$1,818
$637
$350,143
101
1/2033
$1,815
$640
$349,502
102
2/2033
$1,812
$643
$348,859
103
3/2033
$1,808
$647
$348,212
104
4/2033
$1,805
$650
$347,562
105
5/2033
$1,802
$654
$346,908
106
6/2033
$1,798
$657
$346,251
107
7/2033
$1,795
$660
$345,591
108
8/2033
$1,791
$664
$344,927
End of year 9
109
9/2033
$1,788
$667
$344,260
110
10/2033
$1,784
$671
$343,590
111
11/2033
$1,781
$674
$342,915
112
12/2033
$1,777
$678
$342,238
113
1/2034
$1,774
$681
$341,557
114
2/2034
$1,770
$685
$340,872
115
3/2034
$1,767
$688
$340,184
116
4/2034
$1,763
$692
$339,492
117
5/2034
$1,760
$695
$338,797
118
6/2034
$1,756
$699
$338,098
119
7/2034
$1,752
$703
$337,395
120
8/2034
$1,749
$706
$336,689
End of year 10
121
9/2034
$1,745
$710
$335,979
122
10/2034
$1,741
$714
$335,265
123
11/2034
$1,738
$717
$334,548
124
12/2034
$1,734
$721
$333,827
125
1/2035
$1,730
$725
$333,102
126
2/2035
$1,727
$728
$332,374
127
3/2035
$1,723
$732
$331,642
128
4/2035
$1,719
$736
$330,905
129
5/2035
$1,715
$740
$330,166
130
6/2035
$1,711
$744
$329,422
131
7/2035
$1,708
$748
$328,674
132
8/2035
$1,704
$751
$327,923
End of year 11
133
9/2035
$1,700
$755
$327,168
134
10/2035
$1,696
$759
$326,408
135
11/2035
$1,692
$763
$325,645
136
12/2035
$1,688
$767
$324,878
137
1/2036
$1,684
$771
$324,107
138
2/2036
$1,680
$775
$323,332
139
3/2036
$1,676
$779
$322,553
140
4/2036
$1,672
$783
$321,769
141
5/2036
$1,668
$787
$320,982
142
6/2036
$1,664
$791
$320,191
143
7/2036
$1,660
$795
$319,395
144
8/2036
$1,656
$800
$318,596
End of year 12
145
9/2036
$1,651
$804
$317,792
146
10/2036
$1,647
$808
$316,984
147
11/2036
$1,643
$812
$316,172
148
12/2036
$1,639
$816
$315,356
149
1/2037
$1,635
$820
$314,536
150
2/2037
$1,630
$825
$313,711
151
3/2037
$1,626
$829
$312,882
152
4/2037
$1,622
$833
$312,049
153
5/2037
$1,617
$838
$311,211
154
6/2037
$1,613
$842
$310,369
155
7/2037
$1,609
$846
$309,523
156
8/2037
$1,604
$851
$308,672
End of year 13
157
9/2037
$1,600
$855
$307,817
158
10/2037
$1,596
$860
$306,957
159
11/2037
$1,591
$864
$306,093
160
12/2037
$1,587
$868
$305,225
161
1/2038
$1,582
$873
$304,352
162
2/2038
$1,578
$878
$303,474
163
3/2038
$1,573
$882
$302,592
164
4/2038
$1,568
$887
$301,706
165
5/2038
$1,564
$891
$300,814
166
6/2038
$1,559
$896
$299,919
167
7/2038
$1,555
$900
$299,018
168
8/2038
$1,550
$905
$298,113
End of year 14
169
9/2038
$1,545
$910
$297,203
170
10/2038
$1,541
$915
$296,289
171
11/2038
$1,536
$919
$295,369
172
12/2038
$1,531
$924
$294,445
173
1/2039
$1,526
$929
$293,516
174
2/2039
$1,521
$934
$292,583
175
3/2039
$1,517
$939
$291,644
176
4/2039
$1,512
$943
$290,701
177
5/2039
$1,507
$948
$289,752
178
6/2039
$1,502
$953
$288,799
179
7/2039
$1,497
$958
$287,841
180
8/2039
$1,492
$963
$286,878
End of year 15
181
9/2039
$1,487
$968
$285,910
182
10/2039
$1,482
$973
$284,937
183
11/2039
$1,477
$978
$283,959
184
12/2039
$1,472
$983
$282,975
185
1/2040
$1,467
$988
$281,987
186
2/2040
$1,462
$993
$280,994
187
3/2040
$1,456
$999
$279,995
188
4/2040
$1,451
$1,004
$278,991
189
5/2040
$1,446
$1,009
$277,982
190
6/2040
$1,441
$1,014
$276,968
191
7/2040
$1,436
$1,019
$275,949
192
8/2040
$1,430
$1,025
$274,924
End of year 16
193
9/2040
$1,425
$1,030
$273,894
194
10/2040
$1,420
$1,035
$272,859
195
11/2040
$1,414
$1,041
$271,818
196
12/2040
$1,409
$1,046
$270,772
197
1/2041
$1,403
$1,052
$269,720
198
2/2041
$1,398
$1,057
$268,663
199
3/2041
$1,393
$1,062
$267,601
200
4/2041
$1,387
$1,068
$266,533
201
5/2041
$1,382
$1,074
$265,459
202
6/2041
$1,376
$1,079
$264,380
203
7/2041
$1,370
$1,085
$263,295
204
8/2041
$1,365
$1,090
$262,205
End of year 17
205
9/2041
$1,359
$1,096
$261,109
206
10/2041
$1,353
$1,102
$260,007
207
11/2041
$1,348
$1,107
$258,900
208
12/2041
$1,342
$1,113
$257,787
209
1/2042
$1,336
$1,119
$256,668
210
2/2042
$1,330
$1,125
$255,543
211
3/2042
$1,325
$1,131
$254,413
212
4/2042
$1,319
$1,136
$253,276
213
5/2042
$1,313
$1,142
$252,134
214
6/2042
$1,307
$1,148
$250,986
215
7/2042
$1,301
$1,154
$249,832
216
8/2042
$1,295
$1,160
$248,672
End of year 18
217
9/2042
$1,289
$1,166
$247,506
218
10/2042
$1,283
$1,172
$246,333
219
11/2042
$1,277
$1,178
$245,155
220
12/2042
$1,271
$1,184
$243,971
221
1/2043
$1,265
$1,190
$242,780
222
2/2043
$1,258
$1,197
$241,584
223
3/2043
$1,252
$1,203
$240,381
224
4/2043
$1,246
$1,209
$239,172
225
5/2043
$1,240
$1,215
$237,956
226
6/2043
$1,233
$1,222
$236,735
227
7/2043
$1,227
$1,228
$235,507
228
8/2043
$1,221
$1,234
$234,272
End of year 19
229
9/2043
$1,214
$1,241
$233,032
230
10/2043
$1,208
$1,247
$231,784
231
11/2043
$1,201
$1,254
$230,531
232
12/2043
$1,195
$1,260
$229,271
233
1/2044
$1,188
$1,267
$228,004
234
2/2044
$1,182
$1,273
$226,731
235
3/2044
$1,175
$1,280
$225,451
236
4/2044
$1,169
$1,286
$224,164
237
5/2044
$1,162
$1,293
$222,871
238
6/2044
$1,155
$1,300
$221,571
239
7/2044
$1,148
$1,307
$220,265
240
8/2044
$1,142
$1,313
$218,951
End of year 20
241
9/2044
$1,135
$1,320
$217,631
242
10/2044
$1,128
$1,327
$216,304
243
11/2044
$1,121
$1,334
$214,970
244
12/2044
$1,114
$1,341
$213,630
245
1/2045
$1,107
$1,348
$212,282
246
2/2045
$1,100
$1,355
$210,927
247
3/2045
$1,093
$1,362
$209,565
248
4/2045
$1,086
$1,369
$208,196
249
5/2045
$1,079
$1,376
$206,821
250
6/2045
$1,072
$1,383
$205,437
251
7/2045
$1,065
$1,390
$204,047
252
8/2045
$1,058
$1,397
$202,650
End of year 21
253
9/2045
$1,050
$1,405
$201,245
254
10/2045
$1,043
$1,412
$199,833
255
11/2045
$1,036
$1,419
$198,414
256
12/2045
$1,028
$1,427
$196,987
257
1/2046
$1,021
$1,434
$195,553
258
2/2046
$1,014
$1,441
$194,112
259
3/2046
$1,006
$1,449
$192,663
260
4/2046
$999
$1,456
$191,206
261
5/2046
$991
$1,464
$189,743
262
6/2046
$983
$1,472
$188,271
263
7/2046
$976
$1,479
$186,792
264
8/2046
$968
$1,487
$185,305
End of year 22
265
9/2046
$960
$1,495
$183,810
266
10/2046
$953
$1,502
$182,308
267
11/2046
$945
$1,510
$180,798
268
12/2046
$937
$1,518
$179,280
269
1/2047
$929
$1,526
$177,754
270
2/2047
$921
$1,534
$176,220
271
3/2047
$913
$1,542
$174,679
272
4/2047
$905
$1,550
$173,129
273
5/2047
$897
$1,558
$171,571
274
6/2047
$889
$1,566
$170,006
275
7/2047
$881
$1,574
$168,432
276
8/2047
$873
$1,582
$166,850
End of year 23
277
9/2047
$865
$1,590
$165,260
278
10/2047
$857
$1,598
$163,661
279
11/2047
$848
$1,607
$162,054
280
12/2047
$840
$1,615
$160,439
281
1/2048
$832
$1,623
$158,816
282
2/2048
$823
$1,632
$157,184
283
3/2048
$815
$1,640
$155,544
284
4/2048
$806
$1,649
$153,895
285
5/2048
$798
$1,657
$152,237
286
6/2048
$789
$1,666
$150,571
287
7/2048
$780
$1,675
$148,897
288
8/2048
$772
$1,683
$147,213
End of year 24
289
9/2048
$763
$1,692
$145,521
290
10/2048
$754
$1,701
$143,821
291
11/2048
$745
$1,710
$142,111
292
12/2048
$737
$1,718
$140,393
293
1/2049
$728
$1,727
$138,665
294
2/2049
$719
$1,736
$136,929
295
3/2049
$710
$1,745
$135,184
296
4/2049
$701
$1,754
$133,429
297
5/2049
$692
$1,763
$131,666
298
6/2049
$682
$1,773
$129,893
299
7/2049
$673
$1,782
$128,111
300
8/2049
$664
$1,791
$126,320
End of year 25
301
9/2049
$655
$1,800
$124,520
302
10/2049
$645
$1,810
$122,710
303
11/2049
$636
$1,819
$120,891
304
12/2049
$627
$1,828
$119,063
305
1/2050
$617
$1,838
$117,225
306
2/2050
$608
$1,847
$115,378
307
3/2050
$598
$1,857
$113,521
308
4/2050
$588
$1,867
$111,654
309
5/2050
$579
$1,876
$109,778
310
6/2050
$569
$1,886
$107,891
311
7/2050
$559
$1,896
$105,996
312
8/2050
$549
$1,906
$104,090
End of year 26
313
9/2050
$540
$1,916
$102,174
314
10/2050
$530
$1,925
$100,249
315
11/2050
$520
$1,935
$98,314
316
12/2050
$510
$1,945
$96,368
317
1/2051
$500
$1,956
$94,413
318
2/2051
$489
$1,966
$92,447
319
3/2051
$479
$1,976
$90,471
320
4/2051
$469
$1,986
$88,485
321
5/2051
$459
$1,996
$86,488
322
6/2051
$448
$2,007
$84,482
323
7/2051
$438
$2,017
$82,464
324
8/2051
$427
$2,028
$80,437
End of year 27
325
9/2051
$417
$2,038
$78,399
326
10/2051
$406
$2,049
$76,350
327
11/2051
$396
$2,059
$74,291
328
12/2051
$385
$2,070
$72,221
329
1/2052
$374
$2,081
$70,140
330
2/2052
$364
$2,092
$68,048
331
3/2052
$353
$2,102
$65,946
332
4/2052
$342
$2,113
$63,833
333
5/2052
$331
$2,124
$61,709
334
6/2052
$320
$2,135
$59,573
335
7/2052
$309
$2,146
$57,427
336
8/2052
$298
$2,157
$55,270
End of year 28
337
9/2052
$286
$2,169
$53,101
338
10/2052
$275
$2,180
$50,921
339
11/2052
$264
$2,191
$48,730
340
12/2052
$253
$2,202
$46,528
341
1/2053
$241
$2,214
$44,314
342
2/2053
$230
$2,225
$42,088
343
3/2053
$218
$2,237
$39,851
344
4/2053
$207
$2,249
$37,603
345
5/2053
$195
$2,260
$35,343
346
6/2053
$183
$2,272
$33,071
347
7/2053
$171
$2,284
$30,787
348
8/2053
$160
$2,295
$28,492
End of year 29
349
9/2053
$148
$2,307
$26,184
350
10/2053
$136
$2,319
$23,865
351
11/2053
$124
$2,331
$21,534
352
12/2053
$112
$2,343
$19,190
353
1/2054
$99
$2,356
$16,835
354
2/2054
$87
$2,368
$14,467
355
3/2054
$75
$2,380
$12,087
356
4/2054
$63
$2,392
$9,694
357
5/2054
$50
$2,405
$7,290
358
6/2054
$38
$2,417
$4,872
359
7/2054
$25
$2,430
$2,442
360
8/2054
$13
$2,442
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
9/24-8/25
$24,747
$4,714
$395,286
2
9/25-8/26
$24,445
$5,015
$390,271
3
9/26-8/27
$24,124
$5,336
$384,934
4
9/27-8/28
$23,783
$5,678
$379,257
5
9/28-8/29
$23,419
$6,041
$373,215
6
9/29-8/30
$23,033
$6,428
$366,787
7
9/30-8/31
$22,621
$6,839
$359,948
8
9/31-8/32
$22,184
$7,277
$352,670
9
9/32-8/33
$21,718
$7,743
$344,927
10
9/33-8/34
$21,222
$8,239
$336,689
11
9/34-8/35
$20,695
$8,766
$327,923
12
9/35-8/36
$20,134
$9,327
$318,596
13
9/36-8/37
$19,537
$9,924
$308,672
14
9/37-8/38
$18,902
$10,559
$298,113
15
9/38-8/39
$18,226
$11,235
$286,878
16
9/39-8/40
$17,507
$11,954
$274,924
17
9/40-8/41
$16,742
$12,719
$262,205
18
9/41-8/42
$15,928
$13,533
$248,672
19
9/42-8/43
$15,061
$14,399
$234,272
20
9/43-8/44
$14,140
$15,321
$218,951
21
9/44-8/45
$13,159
$16,302
$202,650
22
9/45-8/46
$12,116
$17,345
$185,305
23
9/46-8/47
$11,006
$18,455
$166,850
24
9/47-8/48
$9,825
$19,636
$147,213
25
9/48-8/49
$8,568
$20,893
$126,320
26
9/49-8/50
$7,230
$22,230
$104,090
27
9/50-8/51
$5,808
$23,653
$80,437
28
9/51-8/52
$4,294
$25,167
$55,270
29
9/52-8/53
$2,683
$26,778
$28,492
30
9/53-8/54
$969
$28,492
$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.