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.