With mortgage payments being most people’s largest monthly expense, knowing whether they decrease over time can help you plan for the future.
No, mortgage payments do not decrease over time, the amount you have to pay remains the same until you’ve fully paid your mortgage. However, the amount of money you pay in interest reduces each month, meaning you pay off more of your mortgage balance with every payment.
In this post, I’ll show an example 30 year mortgage payment schedule so you can see how your interest payments reduce throughout your mortgage. Also, ways that you can help your mortgage payments go down over time, such as making overpayments and remortgaging.
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Example 30 Year Mortgage Amortization Schedule
Here’s an example of a 30-year mortgage amortization schedule showing the mortgage payments throughout your mortgage term. As you can see, the mortgage payments remain constant throughout the term of the mortgage, however, the amount of interest you’re paying decreases.
| 30 Year Mortgage Amortization Schedule – 300k Over 30 Years | Monthly Interest | Monthly Principle | Mortgage Payment | Balance |
|---|---|---|---|---|
| Start | 750 | 515 | 1,265 | 300,000 |
| Year 5 | 668 | 597 | 1,265 | 266,719 |
| Year 10 | 572 | 693 | 1,265 | 228,059 |
| Year 15 | 460 | 805 | 1,265 | 182,152 |
| Year 20 | 330 | 935 | 1,265 | 130,986 |
| Year 25 | 179 | 1086 | 1,265 | 70,389 |
| Year 30 | 3 | 1262 | 1,265 | 0 |
This mortgage payment schedule assumes that your interest rate remains constant at 3% throughout the term of your mortgage. This can be achieved by getting a fixed-rate mortgage, however, securing a very long term fixed-rate mortgage could mean you end up with a higher interest rate.
This example helps to demonstrate that your mortgage payments remain the same each month, although as you’re paying off more of your monthly principal each month, you’re actually reducing your mortgage debt faster throughout the term.
There are ways to help your mortgage payments decrease over time, one way being overpaying your monthly mortgage payments, which I’ll explain below.
Does Overpaying Mortgage Reduce Monthly Payments?
Yes, overpaying your mortgage does reduce your monthly mortgage payments. By overpaying, you reduce your outstanding mortgage balance, so have less money that needs paying back over the remaining term as well as less money accruing interest.
Using the same example as the 30-year payment schedule shown earlier in the post, I’ll show you what that would look like if you had an extra £500 you could put towards your mortgage payments each month.
This shows that the minimum mortgage payments that you have to make each month reduces, and if you continue overpaying your mortgage, you will reduce the original 30-year term by 11.5 years, saving over £64,000 in interest payments.
| Overpaying 30 Year Mortgage by 500 – Amortization Schedule | Monthly Interest | Monthly Principle | Mortgage Payment | Minimum Mortgage Payment | Balance |
|---|---|---|---|---|---|
| Start | 750 | 1,015 | 1,765 | 1,265 | 300,000 |
| Year 5 | 589 | 1,176 | 1,765 | 1,111 | 234,396 |
| Year 10 | 399 | 1,366 | 1,765 | 877 | 158,189 |
| Year 15 | 178 | 1,587 | 1,765 | 481 | 69,665 |
| Year 18.5 – Fully Paid | 3 | 1 | 1,765 | 0 | 0 |
| Year 20 | 0 | 0 | 0 | 0 | 0 |
| Year 25 | 0 | 0 | 0 | 0 | 0 |
Mortgage Recasting – Paying A Lump Sum
If your aim is to reduce your monthly mortgage payments however do not want to commit to overpaying your mortgage each month, then mortgage recasting may be a great option.
Mortgage recasting is effectively making a lump sum payment towards your outstanding mortgage balance. Your mortgage lender will then recalculate your minimum mortgage payments, reducing the monthly interest payments and monthly capital repayment resulting in a lower mortgage payment.
This can be a lot easier for some people as you can save the money in a separate account and once you’re comfortable that you want to put some money towards your mortgage balance you can. Just be careful about paying over 10% of your outstanding mortgage balance within a year as highlighted earlier in the post.
Benefits Of Overpaying Your Mortgage
The main benefit of overpaying your mortgage is to reduce the amount of interest that you pay throughout the term of your mortgage. This can add up to some quite significant savings which can be put towards other expenses or improving your standard of living.
- Decreasing your monthly mortgage payment. If you overpay your mortgage for a few years or pay a lump sum, the minimum mortgage payment that you have to pay each month will reduce. This can
- Paying your mortgage off sooner. Depending on your goals in life, paying off your mortgage sooner can help eliminate that monthly expense which can result in having a significant amount of money spare each month. This can allow you to improve your standard of living, put more savings towards retirement or investments, or even allow you to completely retire.
- Peace of mind. To some people, having debt makes them nervous, especially if it’s a high value. Overpaying mortgage payments can help give people peace of mind that they’ll pay their mortgage off sooner as well have lower minimum mortgage payments if something were to go wrong. I’ve written a post about what penalities happen when you pay your mortgage late that you may find useful.
Issues With Overpaying Your Mortgage
There can be some problems with overpaying your mortgage that it’s worth being aware of so you ensure you’re making the right decision for you.
- Overpayment penalties and fees. It’s worth noting that a lot of mortgage products have clauses within them that restrict you from paying more than 10% of the remaining mortgage balance every year. If you were to go over this amount it can result in some quite hefty fees which may offset any benefits from making the extra payments. This means once your outstanding mortgage balance gets low, it may be worth swapping to a different mortgage that doesn’t have any penalties for paying over 10% of the balance.
- Opportunity cost or lost earnings. Mortgage interest rates are at an historic low, being between 2% and 5%. Any money you overpay your mortgage, effectively saves you paying interest on that money at that interest rate. If you could earn more or save more than your mortgage interest rate, you lose out on any incremental benefits of putting your money elsewhere. This can include paying off credit card debt that has a higher rate of interest, investing in stocks, or possibly even putting money towards a business venture. However some people massively value the peace of mind overpaying their mortgage brings, highlighted in the benefits.
- Depleting an emergency fund. If you’re putting every spare bit of money you have towards paying off your mortgage faster, if something goes wrong with your income, such as you lose your job you may not have enough money set aside to make the minimum monthly mortgage payments. Some lenders may allow you to use overpayments towards your
If you’re not interested in overpaying your mortgage but still want your monthly mortgage payments to decrease, remortgaging may be another option to consider.
Remortgaging To Help Your Mortgage Payments Go Down
Overpaying your mortgage isn’t the only way you can help your mortgage payments go down, you can also remortgage. You can remortgage to reduce your interest rate or increase the length of the mortgage term that you’ll repay the money. You can also do both.
- Remortgaging to reduce your interest rate. If you find a new mortgage product, either from a new lender or the same lender that offers a lower interest rate, by remortgaging onto that lower rate, the amount of interest that you get charged each month will reduce. This will reduce your monthly mortgage payment, however, just make sure you factor in any remortgage fees to make sure it’s the right decision.
- Remortgaging to increase your mortgage term. Another strategy to reduce your mortgage payments is to increase your mortgage term. This effectively reduces the amount of principle, or outstanding balance, that you’re paying back each month, decreasing your minimum mortgage payment. It is worth highlighting that this will result in you paying more interest as you’ll be borrowing the money for a longer period of time.
Summary – Do Mortgage Payments Decrease Over Time?
Overall, mortgage payments do not decrease over time, however, you have options available such as overpaying your mortgage or remortgaging that can help your mortgage payments go down.
If you have any questions about the ways you can help your mortgage payments decrease over time, including overpayments or remortgaging, make sure to speak to a mortgage broker. They can give you advice specific to your circumstances as well as run through all of your options.
I’ve written this post about what to ask a mortgage broker to get the most value out of their advice and knowledge that you may find useful.
I hope this post has helped clarify a few questions and given you something to think about on your pursuit of lower monthly mortgage payments.
Hi, I’m John. I’ve always had a keen interest in Finance, so much so that I’ve made a career out of it! This site is a place where I can share everything I’ve learned as well as give me the excuse to research certain topics.
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