Scenario | Interest-Only | With Additional Payment |
---|---|---|
Average Monthly Payment: | $1,933.33 | $1,929.11 |
Months Paid: | 360 | 360 |
Total Monthly Payments: | $696,000.00 | $694,479.38 |
Total Interests Paid: | $696,000.00 | $676,479.38 |
Interest Savings: | $19,520.62 | |
Balance at End of Term: | $320,000.00 | $302,000.00 |
Additional Equity Built: | $0.00 | $18,000.00 |
If you take out an interest only loan and then make additional payments, you might be able to save yourself some money over the long haul. If you take out a 30 year loan for $320000.00 with a 7.250% interest rate, for example, the monthly payment would be about $1,933.33. This means you will pay $696,000.00 in interest at the end of the loan term.
If you pay an extra $50.00 per month, however, your average monthly payment will not be much more, only $1,929.11. At the end of the loan period, you will have paid $676,479.38 in interest. Since your extra payment will get your interest paid off sooner, you will save $19,520.62 in interest by paying an extra $50.00 each month. This will reduce the balance of your $320,000.00 loan to $302,000.00, which will result in $18,000.00 in loan appreciation.