Last month (June):
Years left: 8.833333333
P = $792.41, I =$421.99, Escrow = 621.66
This month (July):
Years left: 8.666666667
P = $798.18, I =$416.22, Escrow = 621.66
One month’s savings from prepayment: $2.62
The payments you make at the beginning of the mortgage are the most productive. (Mortgages work a bit differently than credit card debt, in which all payments are equally productive in terms of interest.)
Our previous mortgage prepayments since our refinance have cut almost 70K of interest off of our 20 year mortgage. That’s 70K off from paying 80K in principal over 2 years. (This month’s prepayment, btw, saved $335.34 over the remaining life of the loan.)
Right now we’re at a point where if we paid off the mortgage tomorrow (a little over 100K) we’d only save 23K over the life of the loan. In some ways that sounds like a lot, but 100,000 could spit out a thousand or so in dividends each year for 9K over 9 years… or it could appreciate $55,000 over those 9 years assuming a rate of 5% year compounded… or both! I’m feeling a bit bullish about the future market returns right now. It is true that within 9 years we could hit another recession and stocks could lose value rather than gain.
In savings, of course, it is unlikely to amount to much since even within a 9 year time-frame we probably won’t be getting back to the interest rate highs of yesteryear… unless of course we have a lot of inflation. Of course, if we have a lot of inflation then we’re going to wish we’d held on to that 4.75% interest rate on 265K a lot longer.
23K is not nothing, but it’s not a full year salary (not anymore, thank goodness). It’s barely childcare costs for a year!
I wonder if we’ll slow down on mortgage prepayment as the gains from doing so become less worthwhile. Or, will we feel like we’re so close to the end we might as well make that final payoff?
No doubt we’ll sell and move elsewhere before then, but who knows…
Would you speed up or slow down when getting towards the end of your mortgage? Or just keep paying it at the same rate?