Mortgage Notes Payable

Essex does not have any indebtedness as all debt is incurred by the Operating Partnership. Mortgage notes payable consist of the following as of December 31, 2017 and 2016 ($ in thousands):



	2017			2016
Fixed rate mortgage notes payable	$	1,739,856		$	1,911,699
Variable rate mortgage notes payable ⁽¹⁾	268,561			279,782
Total mortgage notes payable ⁽²⁾	$	2,008,417		$	2,191,481
Number of properties securing mortgage notes	56			61
Remaining terms	1-29 years			1-30 years
Weighted average interest rate	4.2		%	4.3		%

The aggregate scheduled principal payments of mortgage notes payable at December 31, 2017 are as follows ($ in thousands):



2018	$	202,131
2019	560,389
2020	694,921
2021	44,846
2022	42,466
Thereafter	435,808
	$	1,980,561

⁽¹⁾

Variable rate mortgage notes payable, including $256.6 million in bonds that have been converted to variable rate through total return swap contracts, consists of multi-family housing mortgage revenue bonds secured by deeds of trust on rental properties and guaranteed by collateral pledge agreements, payable monthly at a variable rate as defined in the Loan Agreement (approximately 2.0% at December 2017 and 1.2% at December 2016) including credit enhancement and underwriting fees. Among the terms imposed on the properties, which are security for the bonds, is a requirement that 20% of the apartment homes are subject to tenant income criteria. Principal balances are due in full at various maturity dates from May 2025 through December 2046. Of these bonds, $20.7 million are subject to various interest rate cap agreements that limit the maximum interest rate to such bonds.


⁽²⁾	Includes total unamortized premium of $33.2 million and $50.8 million and reduced by unamortized debt issuance costs of $5.4 million and $7.4 million as of December 31, 2017 and 2016, respectively.

For the Company’s mortgage notes payable as of December 31, 2017, monthly interest expense and principal amortization, excluding balloon payments, totaled approximately $7.0 million and $2.5 million, respectively. Second deeds of trust accounted for none of the mortgage notes payable balance as of both December 31, 2017 and 2016. Repayment of debt before the scheduled maturity date could result in prepayment penalties. The prepayment penalty on the majority of the Company’s mortgage notes payable are computed by the greater of (a) 1% of the amount of the principal being prepaid or (b) the present value of the mortgage note payable which is calculated by multiplying the principal being prepaid by the difference between the interest rate of the mortgage note and the stated yield rate on a specified U.S. treasury security as defined in the mortgage note agreement.