What is a maturity date?

A maturity date is the specific date on which the principal amount of a debt—like an installment loan, mortgage or bond—is due, along with any interest payments. Maturity dates help lay out the timelines of investments or loans and can affect interest rates and the level of risk associated with products.

Key takeaways

• Maturity date refers to the date when a debt’s principal and interest are due.
• Many different kinds of debt use maturity dates, including mortgages, bonds and certificates of deposit (CDs).
• Maturity dates help sort securities like bonds into categories of short-, medium- and long-term.

Maturity dates establish the endpoint of a debt instrument—a financial product used to raise money for an individual or corporation. A debt instrument typically involves a lender, a borrower and a set of terms. Common debt instruments include loans, bonds and CDs. 

The maturity date functions similarly across different debt instruments—it indicates the date of repayment for the principal amount and when interest payments end. In the context of an installment loan, the maturity date refers to the termination date of the debt. The maturity date can also refer to the expiration date of a contract for derivatives, like futures or options.   

Depending on the type of debt instrument, typical maturity dates can look a little different. 

A bond is an example of a fixed-income security, which means that it pays a set amount of interest periodically until it matures. Once a bond reaches maturity, interest payments cease. 

Different bonds can have varying maturities. Corporate bonds, for instance, can reach maturity in under three years. On the other hand, government-issued savings bonds may have maturity dates 20-30 years after they’re issued.    

Certain bonds may be “callable,” which means the bond issuer can pay back the principal before the maturity date, stopping interest payments early. 

Similar to a bond, a CD is an investment product that pays interest on a lump sum of money over a specified period. Unlike bonds, though, CDs are backed by the Federal Deposit Insurance Corporation (FDIC).

The maturity date helps establish the length of the CD. If the holder of the CD does not cash it in at maturity, the financial institution may renew the CD at the same term, but the interest rate could change.

A promissory note is essentially a written promise to pay back funds at a later date. While anyone can invest in promissory notes, they’re generally marketed toward corporate or other experienced investors. The note typically includes the terms of the debt agreement, including the payment schedule and maturity date. 

Maturity dates on promissory notes can range from a few months to several years.

A mortgage’s maturity date helps indicate the length of the mortgage. Typical mortgage lengths are 15 and 30 years. So a 15-year mortgage loan’s maturity date would be 15 years after the mortgage was issued. 

The maturity date will also determine interest payments. Typically, the longer the loan term, the smaller the monthly payments will be.

Maturity dates help sort securities like bonds into general categories based on term length: 

• Short-term maturity: Securities that mature in 3-5 years are typically known as short-term.
• Medium-term maturity: Securities that mature in 4-10 years are typically known as medium-term or intermediate-term.
• Long-term maturity: Securities that mature in 10 years or more are known as long-term.

The term “maturity value” refers to the amount an investor receives when a debt instrument matures. Because the maturity date determines the amount of time a debt accrues interest, it will affect maturity value. Depending on whether your debt instrument uses simple or compound interest, you can calculate maturity value differently.

For simple interest, the maturity value is calculated by multiplying the principal by the interest rate and term to maturity, then adding that to the principal amount. Here is a simple formula to express maturity value:

Maturity value = principal + (principal x interest rate x years to maturity)

So if you were to purchase a bond for $1,000 that earns interest at 5% and reaches maturity in 10 years, you’d receive $50 annually or $500 in interest after 10 years. Including the principal, you’d receive $1,500 total.

For compound interest, the maturity value is calculated by multiplying the principal by 1 plus the interest rate raised to the number of compounding periods. Here is a simple formula for expressing maturity value in compound interest:

Maturity value = principal × (1+interest rate)^number of compounding periods 

So if you purchase a debt instrument at $1,000 with a 5% interest rate over 10 years, but it compounds twice annually, you would earn $1,653.29.

Here are some frequently asked questions about maturity dates:

Maturity dates are an important part of any debt, helping establish the timeline of the debt. While the maturity date generally indicates the debt’s due date or the date of final payment, it can vary depending on the type of debt involved. 

Dive deeper into investing by learning about other financial instruments and how they might play into your personal finance journey.