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:
|Amortization||30 years||25 years||20 years|
|Monthly Mortgage Payment||$1,723||$1,932||$2,252|
|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.