What Is a Loan Maturity Date for a Mortgage?

what is a mortgage prepayment

On the mortgage maturity date, the loan term is complete.

Stockbyte/Stockbyte/Getty Images

More Articles

If you've borrowed money from a bank or other company to buy a house, then you've taken out a mortgage. A mortgage is a loan secured by property: the house which you've purchased and now own. As long as you keep up the monthly payments, the loan is current. A mortgage is a fixed-term loan; it can run 10, 15, 20 or (most commonly) 30 years. The end of that term is known as the maturity date.

Payment in Full

The maturity date represents the due date of the final installment of principal on a loan. You repay a mortgage loan in regular monthly installments; thus the payment of principal is spread over the entire term of the loan. However, the monthly interest amount gradually falls and the principal gradually rises as the

mortgage ages. By the final year of the loan, a high proportion of the payments that you're making go toward principal.

Monthly Payments

Monthly due dates reflect the payment of interest charged on the outstanding principal in the previous month. When you make a payment in September, for example, you're covering the interest due for the month of August. Principal is gradually paid down according to an amortization schedule, which figures the monthly amount due over a period of 30 years or whatever the term of the loan. On the maturity date, the loan reaches its full term and all outstanding principal is due and payable. As a result, ff you've fallen behind on your payments, the final payment due at maturity will be higher than the previous monthly payments; if you are unable to meet that payment, you must renew or refinance the mortgage.

Adjustable Interest Rates

Source: finance.zacks.com

Category: Bank

Similar articles: