Mortgage interet rates are low but heading higher. Suppose you wish to increase your mortgage payment to reduce your dept faster. Let’s see how much interest you would save if you paid off your loan sooner.
Let’s assume you have a $300,000 mortgage at 6% interest-only on a 30-year note. Your monthly payment is approximately $1799.00 on a 30-year interest-only note. The interest paid over 30 years is about $347,000. Add that to the $300,000 purchase price and you have a total of $647,000 into the total payment.
However, if you increase your monthly payment just $100 to $1899.00, you will reduce your payment term by 4 years and save $70,000 in interest. If you boost your payment by $200 to $1999 per month, you will shorten your payment period by almost 7 years and save almost $120,000.
Some precautions to take…ask you lender if you have a pre-payment penalty on your contract, and talk to your CPA or real estate attorney about tax consequences.
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