Author name: Davelle Morrison

Have you ever stopped to do the math on how much interest you pay over the life of your mortgage?  I was in a real estate investment analysis class recently when the instructor asked us to calculate the overall interest paid over the life of a mortgage using various amortizations.  Consider the following example:  Scenarios #1 #2 #3 Mortgage $400,000 $400,000 $400,000 Interest Rate 3.19% 3.19% 3.19% Amortization 30 years 25 years 20 years Monthly Mortgage Payment $1,723 $1,932 $2,252 Principal Paid $400,000 $400,000 $400,000 Interest Paid (over the life of the mortgage $220,314 $179,658 $140,572 We can see that in the above example that paying down your mortgage in 25 years offers you a savings of $40,656 over the life of your mortgage.  Paying your mortgage off in 20 years provides a savings of $79,742 over the life of your mortgage.  The savings are significant and should make most of us think about how fast we should pay down our mortgages.

One of the biggest bills you face is your tax bill.  Yet most of us ignore this reality when we are doing our budgeting.  One of the ways that you can give yourself an additional write off is to have a home with an income suite.  Most people don’t want to have someone else living with them.  The reality is having a basement apartment in your home allows you to write off approximately one third of your home expenses.  For example you can write off a portion of your utility bills and all of the renovations that you have done to make the apartment rentable.  Receiving an additional $800- $1,000 per month can certainly help you with your bills each month.  This money can be used to pay down your mortgage faster or helpful as a back up income should you or your spouse lose your job or take parental leave.  You really need to ask yourself how much living space do you really need?   What do you keep in your basement? Is it storage of things you don’t use? Old clothes that can be thrown out or given away? Items you haven’t seen or used in at least 6 months.  My rule of thumb is if I haven’t used it in 6 months, its time to trash it.  Couldn’t you use an additional $8,400 – $12,000/year?