How to Save Thousands of Dollars on your Home

house-money-3d2Have 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.