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: $2,536.17
Monthly
Total
Mortgage Payment
$2,536.17
$913,020.86
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
$3,661.17
$1,318,020.86
House Price
$500,000.00
Loan Amount
$400,000.00
Down Payment
$100,000.00
Total of 360 Mortgage Payments
$913,020.86
Total Interest
$513,020.86
Mortgage Payoff Date
Apr. 2055
Amortization schedule
Month
Date
Interest
Principal
Ending Balance
1
04/2025
$2,177
$360
$399,640
2
5/2025
$2,175
$361
$399,279
3
6/2025
$2,173
$363
$398,916
4
7/2025
$2,171
$365
$398,550
5
8/2025
$2,169
$367
$398,183
6
9/2025
$2,167
$369
$397,813
7
10/2025
$2,165
$371
$397,442
8
11/2025
$2,163
$373
$397,069
9
12/2025
$2,161
$375
$396,693
10
1/2026
$2,159
$377
$396,316
11
2/2026
$2,157
$380
$395,936
12
3/2026
$2,155
$382
$395,554
End of year 1
13
4/2026
$2,152
$384
$395,171
14
5/2026
$2,150
$386
$394,785
15
6/2026
$2,148
$388
$394,397
16
7/2026
$2,146
$390
$394,007
17
8/2026
$2,144
$392
$393,615
18
9/2026
$2,142
$394
$393,221
19
10/2026
$2,140
$396
$392,824
20
11/2026
$2,138
$399
$392,426
21
12/2026
$2,135
$401
$392,025
22
1/2027
$2,133
$403
$391,622
23
2/2027
$2,131
$405
$391,217
24
3/2027
$2,129
$407
$390,810
End of year 2
25
4/2027
$2,127
$410
$390,400
26
5/2027
$2,124
$412
$389,989
27
6/2027
$2,122
$414
$389,575
28
7/2027
$2,120
$416
$389,158
29
8/2027
$2,118
$418
$388,740
30
9/2027
$2,115
$421
$388,319
31
10/2027
$2,113
$423
$387,896
32
11/2027
$2,111
$425
$387,471
33
12/2027
$2,108
$428
$387,043
34
1/2028
$2,106
$430
$386,613
35
2/2028
$2,104
$432
$386,181
36
3/2028
$2,101
$435
$385,746
End of year 3
37
4/2028
$2,099
$437
$385,309
38
5/2028
$2,097
$439
$384,869
39
6/2028
$2,094
$442
$384,428
40
7/2028
$2,092
$444
$383,983
41
8/2028
$2,090
$447
$383,537
42
9/2028
$2,087
$449
$383,088
43
10/2028
$2,085
$452
$382,636
44
11/2028
$2,082
$454
$382,182
45
12/2028
$2,080
$456
$381,726
46
1/2029
$2,077
$459
$381,267
47
2/2029
$2,075
$461
$380,805
48
3/2029
$2,072
$464
$380,341
End of year 4
49
4/2029
$2,070
$466
$379,875
50
5/2029
$2,067
$469
$379,406
51
6/2029
$2,065
$472
$378,934
52
7/2029
$2,062
$474
$378,460
53
8/2029
$2,059
$477
$377,983
54
9/2029
$2,057
$479
$377,504
55
10/2029
$2,054
$482
$377,022
56
11/2029
$2,052
$485
$376,538
57
12/2029
$2,049
$487
$376,050
58
1/2030
$2,046
$490
$375,561
59
2/2030
$2,044
$492
$375,068
60
3/2030
$2,041
$495
$374,573
End of year 5
61
4/2030
$2,038
$498
$374,075
62
5/2030
$2,036
$501
$373,574
63
6/2030
$2,033
$503
$373,071
64
7/2030
$2,030
$506
$372,565
65
8/2030
$2,027
$509
$372,056
66
9/2030
$2,025
$512
$371,545
67
10/2030
$2,022
$514
$371,030
68
11/2030
$2,019
$517
$370,513
69
12/2030
$2,016
$520
$369,993
70
1/2031
$2,013
$523
$369,470
71
2/2031
$2,011
$526
$368,945
72
3/2031
$2,008
$528
$368,416
End of year 6
73
4/2031
$2,005
$531
$367,885
74
5/2031
$2,002
$534
$367,351
75
6/2031
$1,999
$537
$366,814
76
7/2031
$1,996
$540
$366,273
77
8/2031
$1,993
$543
$365,730
78
9/2031
$1,990
$546
$365,184
79
10/2031
$1,987
$549
$364,635
80
11/2031
$1,984
$552
$364,084
81
12/2031
$1,981
$555
$363,529
82
1/2032
$1,978
$558
$362,971
83
2/2032
$1,975
$561
$362,410
84
3/2032
$1,972
$564
$361,846
End of year 7
85
4/2032
$1,969
$567
$361,278
86
5/2032
$1,966
$570
$360,708
87
6/2032
$1,963
$573
$360,135
88
7/2032
$1,960
$576
$359,558
89
8/2032
$1,957
$580
$358,979
90
9/2032
$1,953
$583
$358,396
91
10/2032
$1,950
$586
$357,810
92
11/2032
$1,947
$589
$357,221
93
12/2032
$1,944
$592
$356,629
94
1/2033
$1,941
$596
$356,033
95
2/2033
$1,937
$599
$355,435
96
3/2033
$1,934
$602
$354,833
End of year 8
97
4/2033
$1,931
$605
$354,227
98
5/2033
$1,928
$609
$353,619
99
6/2033
$1,924
$612
$353,007
100
7/2033
$1,921
$615
$352,392
101
8/2033
$1,918
$619
$351,773
102
9/2033
$1,914
$622
$351,151
103
10/2033
$1,911
$625
$350,526
104
11/2033
$1,907
$629
$349,897
105
12/2033
$1,904
$632
$349,265
106
1/2034
$1,901
$636
$348,629
107
2/2034
$1,897
$639
$347,990
108
3/2034
$1,894
$643
$347,348
End of year 9
109
4/2034
$1,890
$646
$346,702
110
5/2034
$1,887
$650
$346,052
111
6/2034
$1,883
$653
$345,399
112
7/2034
$1,880
$657
$344,743
113
8/2034
$1,876
$660
$344,082
114
9/2034
$1,872
$664
$343,419
115
10/2034
$1,869
$667
$342,751
116
11/2034
$1,865
$671
$342,080
117
12/2034
$1,861
$675
$341,405
118
1/2035
$1,858
$678
$340,727
119
2/2035
$1,854
$682
$340,045
120
3/2035
$1,850
$686
$339,359
End of year 10
121
4/2035
$1,847
$689
$338,670
122
5/2035
$1,843
$693
$337,977
123
6/2035
$1,839
$697
$337,280
124
7/2035
$1,835
$701
$336,579
125
8/2035
$1,832
$705
$335,874
126
9/2035
$1,828
$708
$335,166
127
10/2035
$1,824
$712
$334,453
128
11/2035
$1,820
$716
$333,737
129
12/2035
$1,816
$720
$333,017
130
1/2036
$1,812
$724
$332,293
131
2/2036
$1,808
$728
$331,565
132
3/2036
$1,804
$732
$330,833
End of year 11
133
4/2036
$1,800
$736
$330,097
134
5/2036
$1,796
$740
$329,357
135
6/2036
$1,792
$744
$328,614
136
7/2036
$1,788
$748
$327,866
137
8/2036
$1,784
$752
$327,114
138
9/2036
$1,780
$756
$326,357
139
10/2036
$1,776
$760
$325,597
140
11/2036
$1,772
$764
$324,833
141
12/2036
$1,768
$769
$324,064
142
1/2037
$1,763
$773
$323,292
143
2/2037
$1,759
$777
$322,515
144
3/2037
$1,755
$781
$321,733
End of year 12
145
4/2037
$1,751
$785
$320,948
146
5/2037
$1,746
$790
$320,158
147
6/2037
$1,742
$794
$319,364
148
7/2037
$1,738
$798
$318,566
149
8/2037
$1,734
$803
$317,764
150
9/2037
$1,729
$807
$316,957
151
10/2037
$1,725
$811
$316,145
152
11/2037
$1,720
$816
$315,329
153
12/2037
$1,716
$820
$314,509
154
1/2038
$1,711
$825
$313,684
155
2/2038
$1,707
$829
$312,855
156
3/2038
$1,702
$834
$312,021
End of year 13
157
4/2038
$1,698
$838
$311,183
158
5/2038
$1,693
$843
$310,340
159
6/2038
$1,689
$847
$309,493
160
7/2038
$1,684
$852
$308,641
161
8/2038
$1,680
$857
$307,784
162
9/2038
$1,675
$861
$306,923
163
10/2038
$1,670
$866
$306,057
164
11/2038
$1,665
$871
$305,186
165
12/2038
$1,661
$875
$304,311
166
1/2039
$1,656
$880
$303,431
167
2/2039
$1,651
$885
$302,546
168
3/2039
$1,646
$890
$301,656
End of year 14
169
4/2039
$1,642
$895
$300,761
170
5/2039
$1,637
$900
$299,862
171
6/2039
$1,632
$904
$298,957
172
7/2039
$1,627
$909
$298,048
173
8/2039
$1,622
$914
$297,134
174
9/2039
$1,617
$919
$296,214
175
10/2039
$1,612
$924
$295,290
176
11/2039
$1,607
$929
$294,361
177
12/2039
$1,602
$934
$293,426
178
1/2040
$1,597
$939
$292,487
179
2/2040
$1,592
$945
$291,542
180
3/2040
$1,586
$950
$290,593
End of year 15
181
4/2040
$1,581
$955
$289,638
182
5/2040
$1,576
$960
$288,678
183
6/2040
$1,571
$965
$287,712
184
7/2040
$1,566
$971
$286,742
185
8/2040
$1,560
$976
$285,766
186
9/2040
$1,555
$981
$284,785
187
10/2040
$1,550
$986
$283,799
188
11/2040
$1,544
$992
$282,807
189
12/2040
$1,539
$997
$281,809
190
1/2041
$1,534
$1,003
$280,807
191
2/2041
$1,528
$1,008
$279,799
192
3/2041
$1,523
$1,014
$278,785
End of year 16
193
4/2041
$1,517
$1,019
$277,766
194
5/2041
$1,512
$1,025
$276,741
195
6/2041
$1,506
$1,030
$275,711
196
7/2041
$1,500
$1,036
$274,675
197
8/2041
$1,495
$1,041
$273,634
198
9/2041
$1,489
$1,047
$272,587
199
10/2041
$1,483
$1,053
$271,534
200
11/2041
$1,478
$1,059
$270,475
201
12/2041
$1,472
$1,064
$269,411
202
1/2042
$1,466
$1,070
$268,341
203
2/2042
$1,460
$1,076
$267,265
204
3/2042
$1,454
$1,082
$266,183
End of year 17
205
4/2042
$1,448
$1,088
$265,095
206
5/2042
$1,443
$1,094
$264,002
207
6/2042
$1,437
$1,100
$262,902
208
7/2042
$1,431
$1,106
$261,797
209
8/2042
$1,425
$1,112
$260,685
210
9/2042
$1,419
$1,118
$259,567
211
10/2042
$1,412
$1,124
$258,444
212
11/2042
$1,406
$1,130
$257,314
213
12/2042
$1,400
$1,136
$256,178
214
1/2043
$1,394
$1,142
$255,036
215
2/2043
$1,388
$1,148
$253,888
216
3/2043
$1,382
$1,155
$252,733
End of year 18
217
4/2043
$1,375
$1,161
$251,572
218
5/2043
$1,369
$1,167
$250,405
219
6/2043
$1,363
$1,174
$249,231
220
7/2043
$1,356
$1,180
$248,051
221
8/2043
$1,350
$1,186
$246,865
222
9/2043
$1,343
$1,193
$245,672
223
10/2043
$1,337
$1,199
$244,473
224
11/2043
$1,330
$1,206
$243,267
225
12/2043
$1,324
$1,212
$242,055
226
1/2044
$1,317
$1,219
$240,836
227
2/2044
$1,311
$1,226
$239,610
228
3/2044
$1,304
$1,232
$238,378
End of year 19
229
4/2044
$1,297
$1,239
$237,139
230
5/2044
$1,290
$1,246
$235,893
231
6/2044
$1,284
$1,253
$234,640
232
7/2044
$1,277
$1,259
$233,381
233
8/2044
$1,270
$1,266
$232,115
234
9/2044
$1,263
$1,273
$230,842
235
10/2044
$1,256
$1,280
$229,562
236
11/2044
$1,249
$1,287
$228,275
237
12/2044
$1,242
$1,294
$226,981
238
1/2045
$1,235
$1,301
$225,680
239
2/2045
$1,228
$1,308
$224,372
240
3/2045
$1,221
$1,315
$223,057
End of year 20
241
4/2045
$1,214
$1,322
$221,734
242
5/2045
$1,207
$1,330
$220,405
243
6/2045
$1,199
$1,337
$219,068
244
7/2045
$1,192
$1,344
$217,724
245
8/2045
$1,185
$1,351
$216,372
246
9/2045
$1,177
$1,359
$215,014
247
10/2045
$1,170
$1,366
$213,648
248
11/2045
$1,163
$1,374
$212,274
249
12/2045
$1,155
$1,381
$210,893
250
1/2046
$1,148
$1,389
$209,504
251
2/2046
$1,140
$1,396
$208,108
252
3/2046
$1,132
$1,404
$206,705
End of year 21
253
4/2046
$1,125
$1,411
$205,293
254
5/2046
$1,117
$1,419
$203,874
255
6/2046
$1,109
$1,427
$202,447
256
7/2046
$1,102
$1,435
$201,013
257
8/2046
$1,094
$1,442
$199,571
258
9/2046
$1,086
$1,450
$198,120
259
10/2046
$1,078
$1,458
$196,662
260
11/2046
$1,070
$1,466
$195,196
261
12/2046
$1,062
$1,474
$193,722
262
1/2047
$1,054
$1,482
$192,240
263
2/2047
$1,046
$1,490
$190,750
264
3/2047
$1,038
$1,498
$189,252
End of year 22
265
4/2047
$1,030
$1,506
$187,746
266
5/2047
$1,022
$1,515
$186,231
267
6/2047
$1,013
$1,523
$184,709
268
7/2047
$1,005
$1,531
$183,177
269
8/2047
$997
$1,539
$181,638
270
9/2047
$988
$1,548
$180,090
271
10/2047
$980
$1,556
$178,534
272
11/2047
$972
$1,565
$176,970
273
12/2047
$963
$1,573
$175,396
274
1/2048
$954
$1,582
$173,815
275
2/2048
$946
$1,590
$172,224
276
3/2048
$937
$1,599
$170,625
End of year 23
277
4/2048
$928
$1,608
$169,018
278
5/2048
$920
$1,616
$167,401
279
6/2048
$911
$1,625
$165,776
280
7/2048
$902
$1,634
$164,142
281
8/2048
$893
$1,643
$162,499
282
9/2048
$884
$1,652
$160,847
283
10/2048
$875
$1,661
$159,186
284
11/2048
$866
$1,670
$157,516
285
12/2048
$857
$1,679
$155,837
286
1/2049
$848
$1,688
$154,149
287
2/2049
$839
$1,697
$152,452
288
3/2049
$830
$1,707
$150,745
End of year 24
289
4/2049
$820
$1,716
$149,029
290
5/2049
$811
$1,725
$147,304
291
6/2049
$802
$1,735
$145,569
292
7/2049
$792
$1,744
$143,825
293
8/2049
$783
$1,754
$142,072
294
9/2049
$773
$1,763
$140,309
295
10/2049
$764
$1,773
$138,536
296
11/2049
$754
$1,782
$136,754
297
12/2049
$744
$1,792
$134,962
298
1/2050
$734
$1,802
$133,160
299
2/2050
$725
$1,812
$131,349
300
3/2050
$715
$1,821
$129,527
End of year 25
301
4/2050
$705
$1,831
$127,696
302
5/2050
$695
$1,841
$125,855
303
6/2050
$685
$1,851
$124,003
304
7/2050
$675
$1,861
$122,142
305
8/2050
$665
$1,872
$120,270
306
9/2050
$654
$1,882
$118,389
307
10/2050
$644
$1,892
$116,497
308
11/2050
$634
$1,902
$114,595
309
12/2050
$624
$1,913
$112,682
310
1/2051
$613
$1,923
$110,759
311
2/2051
$603
$1,933
$108,825
312
3/2051
$592
$1,944
$106,882
End of year 26
313
4/2051
$582
$1,955
$104,927
314
5/2051
$571
$1,965
$102,962
315
6/2051
$560
$1,976
$100,986
316
7/2051
$550
$1,987
$98,999
317
8/2051
$539
$1,997
$97,002
318
9/2051
$528
$2,008
$94,993
319
10/2051
$517
$2,019
$92,974
320
11/2051
$506
$2,030
$90,944
321
12/2051
$495
$2,041
$88,903
322
1/2052
$484
$2,052
$86,850
323
2/2052
$473
$2,064
$84,787
324
3/2052
$461
$2,075
$82,712
End of year 27
325
4/2052
$450
$2,086
$80,626
326
5/2052
$439
$2,097
$78,528
327
6/2052
$427
$2,109
$76,420
328
7/2052
$416
$2,120
$74,299
329
8/2052
$404
$2,132
$72,167
330
9/2052
$393
$2,143
$70,024
331
10/2052
$381
$2,155
$67,869
332
11/2052
$369
$2,167
$65,702
333
12/2052
$358
$2,179
$63,523
334
1/2053
$346
$2,190
$61,333
335
2/2053
$334
$2,202
$59,130
336
3/2053
$322
$2,214
$56,916
End of year 28
337
4/2053
$310
$2,226
$54,690
338
5/2053
$298
$2,239
$52,451
339
6/2053
$285
$2,251
$50,200
340
7/2053
$273
$2,263
$47,937
341
8/2053
$261
$2,275
$45,662
342
9/2053
$248
$2,288
$43,374
343
10/2053
$236
$2,300
$41,074
344
11/2053
$224
$2,313
$38,762
345
12/2053
$211
$2,325
$36,436
346
1/2054
$198
$2,338
$34,098
347
2/2054
$186
$2,351
$31,748
348
3/2054
$173
$2,363
$29,384
End of year 29
349
4/2054
$160
$2,376
$27,008
350
5/2054
$147
$2,389
$24,619
351
6/2054
$134
$2,402
$22,217
352
7/2054
$121
$2,415
$19,801
353
8/2054
$108
$2,428
$17,373
354
9/2054
$95
$2,442
$14,931
355
10/2054
$81
$2,455
$12,476
356
11/2054
$68
$2,468
$10,008
357
12/2054
$54
$2,482
$7,526
358
1/2055
$41
$2,495
$5,031
359
2/2055
$27
$2,509
$2,522
360
3/2055
$14
$2,522
$0
End of year 30
Year
Date
Interest
Principal
Ending Balance
1
4/25-3/26
$25,989
$4,446
$395,554
2
4/26-3/27
$25,689
$4,745
$390,810
3
4/27-3/28
$25,370
$5,064
$385,746
4
4/28-3/29
$25,029
$5,405
$380,341
5
4/29-3/30
$24,666
$5,768
$374,573
6
4/30-3/31
$24,278
$6,157
$368,416
7
4/31-3/32
$23,863
$6,571
$361,846
8
4/32-3/33
$23,421
$7,013
$354,833
9
4/33-3/34
$22,949
$7,485
$347,348
10
4/34-3/35
$22,446
$7,988
$339,359
11
4/35-3/36
$21,908
$8,526
$330,833
12
4/36-3/37
$21,334
$9,100
$321,733
13
4/37-3/38
$20,722
$9,712
$312,021
14
4/38-3/39
$20,068
$10,366
$301,656
15
4/39-3/40
$19,371
$11,063
$290,593
16
4/40-3/41
$18,626
$11,808
$278,785
17
4/41-3/42
$17,832
$12,602
$266,183
18
4/42-3/43
$16,984
$13,450
$252,733
19
4/43-3/44
$16,079
$14,355
$238,378
20
4/44-3/45
$15,113
$15,321
$223,057
21
4/45-3/46
$14,082
$16,352
$206,705
22
4/46-3/47
$12,982
$17,452
$189,252
23
4/47-3/48
$11,807
$18,627
$170,625
24
4/48-3/49
$10,554
$19,880
$150,745
25
4/49-3/50
$9,216
$21,218
$129,527
26
4/50-3/51
$7,788
$22,646
$106,882
27
4/51-3/52
$6,264
$24,170
$82,712
28
4/52-3/53
$4,638
$25,796
$56,916
29
4/53-3/54
$2,902
$27,532
$29,384
30
4/54-3/55
$1,050
$29,384
$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.