Refinanced my loan last month (went from 4.875 to 2.875% interest). Got all my paperwork and was setting up my online account with my lender so I don’t have to mail in a payment.
Noticed my lender has a nice Amortization Calculator on their site. 20 year and 30 year notes had the same interest rate, so I went with the 30 year and planned to make extra payments. I plugged some extra additional principle payments into the calculator and wow! I knew they helped shorted the time on your mortgage, and lower your interested paid, but not by how much. On a $160k note, with 2.875% interest:
- If I run the note is full 30 years (360 months) I will pay about $79k in interest.
- If I pay an extra $100/mo towards principle I shave 68 months (5.7 years!) and $16.5K off my interest
- Extra $200/mo – 114 months off (9.5 years) and $27k less interest
- Extra $300/mo? Almost cuts the loan time in half – 147mo (12.15 years) and $34.5K less interest!
Again, knew it helped, but seeing HOW much it shortens the loan, and reduces the interest I pay was eye opening. Defiantly paying and extra every month.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.