How To Change Your Mortgage Amortization Schedule

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Published Nov. 30, 2022
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One of the benefits of mortgage amortization is that it tells you how much you’ll pay each month, and when you’ll finish repaying your home loan.

if you’re struggling to cover your mortgage payment each month — or you’re making a lot more money than you were when you first took out your loan — then you may benefit from adjusting your amortization schedule.

Here’s how to change your mortgage amortization schedule.

Reduce Your Monthly Payment

If you’re having a hard time affording your mortgage each month, changing your amortization schedule can reduce your monthly payment. These are the options:

  • Refinance to a longer loan term. This gives you more time to pay off your loan, and lowers the monthly payment. However, it also means you’ll be making payments longer and paying more interest, which increases the total cost of your loan.
  • Loan modification. A loan modification changes the terms of your existing loan. A loan modification could help you lower your interest rate or extend your loan term. However, mortgage lenders aren’t obligated to accept requests for a loan modification.

Pay Off Your Loan More Quickly

The faster you pay off your mortgage, the more quickly you’ll own your home free and clear, and the less overall interest you’ll pay. There are several ways you can do this:

  • Refinance to a shorter loan term. If you refinance to a shorter loan term, then you won’t have to pay as many years of interest. Just be prepared for a higher monthly payment.
  • Make extra payments. Instead of committing to higher monthly payments, you can just make extra payments when you’re able to afford it. The extra will be applied to your loan balance, reducing it more quickly than if you just made the required payments.
  • Pay more each month. Instead of making your minimum mortgage payment, you could pay extra each month. Again, the extra is applied to your loan balance, and you’ll chip away more quickly at your principal balance over time.
  • Switch to biweekly payments. Many lenders let you pay half the monthly payment amount every other week. This schedule means that, over 52 weeks, you’ll make 26 half-monthly payments — equivalent to 13 monthly payments instead of 12.

However, some lenders charge a prepayment penalty if you repay your loan early. Before you start making extra payments, find out if your loan has a prepayment penalty. It may be worth eating the cost of the fee if you stand to save more money on interest by paying off the loan early.

Pros and Cons of Changing Your Mortgage Amortization Schedule

Here are some of the benefits and drawbacks of changing your mortgage amortization schedule.

Pros

  • You can reduce your monthly payment, freeing up more room in your budget.
  • You can pay off your loan sooner and save on interest.

Cons

  • If you pay off your loan sooner, you may face a prepayment penalty.
  • If you shorten your loan term, then you’ll need to make higher monthly payments.
  • If you extend your loan term, then you’ll pay more overall for the loan.

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