I made a new amortization schedule based on my new interest rate, remaining principal balance and monthly payment. When compared to my previous amortization schedule, the benefits of a 15-year fixed mortgage are super obvious. In order to show my amortization schedule within a reasonable amount of space I hid 11 of the 12 months of the year.
The first thing that jumps out at me is the amount of my monthly payment that goes towards principal. With my 15 year fixed mortgage, my first payment has $855.67 going towards principal. With my 30 year fixed mortgage, the first payment had $214.63 going towards principal. It wouldn’t be until the 18th year that I would begin paying around $850 towards principal. The 15-year mortgage quadrupled the amount of my monthly payment going towards principal.
The second thing that jumps out is the ratio of the interest to principal portions of my monthly payment. I am only paying slightly more towards interest than towards principal. In fact, the ratio shifts towards the principal’s favor before the first year is over. For my 30 year mortgage, my first payment was 85/15 interest/principal and it took 19 years to pay more towards principal than interest.
The final thing that jumped out was the total interest paid. My 15 year mortgage has me paying around $90,000 over the life of the loan. My 30 year mortgage had me paying around $275,000 over the life of the loan.
I know it’s kind of like comparing apples to oranges because the interest rates differ by 1.50%, but there is only one downside when comparing a 15 year to a 30 year mortgage. The monthly payment is higher for 15 year mortgages. My monthly payment increased by $350. There are people that argue for 30 year mortgages by saying it’s nice to have extra cash for emergencies. They also say it is better to invest that money ther than put it towards principal. They also say you can make a 30 year mortgage the same as a 15 year mortgage by paying the difference towards principal every month.
Each of those statements are valid points. I just have a really hard time comparing the two amortization schedules and not feeling happy that I have a 15 year mortgage rather than a 30 year mortgage. It’s painful to pay so much money every month and not see your equity increase very much. The numbers are very powerful.
FYI, learn how to make your own amortization schedule.
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