Don’t let a lower payment hide a term reset

Payment and payoff date are separate choices

Mortgage payments are amortized: interest is charged on the outstanding balance, while principal reduces it. Restarting a 30-year loan after several years can lower a payment partly by spreading debt over more months.

Illustration: a homeowner with 26 years remaining can compare a new 30-year term with a 26-year same-payoff-date term. The first may improve monthly cash flow; the second is a cleaner comparison of rate savings.

Use both views

Compare monthly payment for budget impact and net financial position at the date you expect to sell or refinance. Neither alone answers every question.

• CFPB: Mortgage amortization