For the past few years, I have rounded up my mortgage payment to the nearest $100. It isn’t a ton of money, and to be honest I don’t even give it much thought. Normally I just throw away the statement without even opening it, and then last week for whatever reason I actually opened it. I saw the remaining balance and I began to actually think about those few extra dollars. Not because it is a lot, but rather, on a level of curiosity. Am I really saving that much interest? Did it really change my amortization table? Should I continue to do it even if it doesn’t make mathematical sense because the amount is so low? etc. etc. As I write this introductory paragraph, I have no clue the difference what my mortgage amortization table is supposed to look like and what it actually looks like today.
My House Mortgage Information
A few years back I provided a pretty detailed account of my home buying experience. It was an experience I didn’t much enjoy, however, I can look back today and say I really do like where The Wife and I ended up and the area we have now raising our children. I wasn’t so confident when I bought our place in 2013.
How are 30 Year Fixed Mortgages Calculated?
I assume most people do not even think about it but a traditional 30 year year fixed mortgage provides an amortization schedule wherein a certain portion of your level payment goes to interest and a certain portion goes to principal. The interest to principal ratio changes as you get deeper into the life of the loan. There are other ways a note could be calculated but those are usually of no concern for someone with a 30 year fixed note – they are/were of major concern for those who used or are still using 5, 7 or 10 year ARMs (adjustable rate mortgages).
On January 18, 2013 I bought my home ($485,000 price) with the following note:
- 30 year fixed
- $388,000 Borrowed
- 3.375% Rate (I am pretty sure I got in at near the historical low)
This provides me with an amortization schedule of:
| Year | Total Payments |
Principal Paid |
Interest Paid |
Ending Principal Balance |
|---|---|---|---|---|
| $388,000.00 | ||||
| 1 | $20,583.96 | $7,605.92 | $12,978.04 | $380,394.08 |
| 2 | $20,583.96 | $7,866.61 | $12,717.35 | $372,527.47 |
| 3 | $20,583.96 | $8,136.26 | $12,447.70 | $364,391.21 |
| 4 | $20,583.96 | $8,415.13 | $12,168.83 | $355,976.08 |
| 5 | $20,583.96 | $8,703.59 | $11,880.37 | $347,272.49 |
| 6 | $20,583.96 | $9,001.91 | $11,582.05 | $338,270.58 |
| 7 | $20,583.96 | $9,310.46 | $11,273.50 | $328,960.12 |
| 8 | $20,583.96 | $9,629.62 | $10,954.34 | $319,330.50 |
| 9 | $20,583.96 | $9,959.68 | $10,624.28 | $309,370.82 |
| 10 | $20,583.96 | $10,301.07 | $10,282.89 | $299,069.75 |
| 11 | $20,583.96 | $10,654.16 | $9,929.80 | $288,415.59 |
| 12 | $20,583.96 | $11,019.35 | $9,564.61 | $277,396.24 |
| 13 | $20,583.96 | $11,397.06 | $9,186.90 | $265,999.18 |
| 14 | $20,583.96 | $11,787.72 | $8,796.24 | $254,211.46 |
| 15 | $20,583.96 | $12,191.76 | $8,392.20 | $242,019.70 |
| 16 | $20,583.96 | $12,609.66 | $7,974.30 | $229,410.04 |
| 17 | $20,583.96 | $13,041.87 | $7,542.09 | $216,368.17 |
| 18 | $20,583.96 | $13,488.92 | $7,095.04 | $202,879.25 |
| 19 | $20,583.96 | $13,951.28 | $6,632.68 | $188,927.97 |
| 20 | $20,583.96 | $14,429.49 | $6,154.47 | $174,498.48 |
| 21 | $20,583.96 | $14,924.08 | $5,659.88 | $159,574.40 |
| 22 | $20,583.96 | $15,435.65 | $5,148.31 | $144,138.75 |
| 23 | $20,583.96 | $15,964.72 | $4,619.24 | $128,174.03 |
| 24 | $20,583.96 | $16,511.94 | $4,072.02 | $111,662.09 |
| 25 | $20,583.96 | $17,077.92 | $3,506.04 | $94,584.17 |
| 26 | $20,583.96 | $17,663.32 | $2,920.64 | $76,920.85 |
| 27 | $20,583.96 | $18,268.75 | $2,315.21 | $58,652.10 |
| 28 | $20,583.96 | $18,894.96 | $1,689.00 | $39,757.14 |
| 29 | $20,583.96 | $19,542.62 | $1,041.34 | $20,214.52 |
| 30 | $20,586.01 | $20,214.52 | $371.49 | $0.00 |
Annually doesn’t exactly provide me with the information I am looking for:
So, my current balance should be $353,826.50 (month 51 of a mind blowing 360 month note).
Comparing my Original Calculated Mortgage and my Actual Mortgage Balance
Taking a look at my current outstanding balance we have:
So we are at $352,925.08 rather than $353.826.50. Honestly, before writing this post I thought that difference would be larger. I am pretty sure I could use those micro payments in a better way, but there is no guarantee I actually do it. So, despite taking 500 words to learn that I could probably do something better with these tiny add-on payments, I am going to continue doing what I have been doing.
Evan – have you checked out this sort of extra payment calculator:
https://www.calcxml.com/calculators/extra-payment-calculator
This would tell you the impact on the term/interest savings of a specific additional payment amount each month. An extra $100/month on your mortgage should cut the term by more than 2 years and would save you about $16.5k in interest.
The idea of paying it off 2 years sooner seems like an, “ok, that’s nice” sort of thing, but the idea of saving $16.5k in interest would be highly appealing to me.