|Scenario||Interest-Only||With Additional Payment|
|Average Monthly Payment:||$677.08||$702.78|
|Total Monthly Payments:||$243,750.00||$252,999.37|
|Total Interests Paid:||$243,750.00||$234,999.37|
|Balance at End of Term:||$250,000.00||$232,000.00|
|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 $250000.00 with a 3.250% interest rate, for example, the monthly payment would be about $677.08. This means you will pay $243,750.00 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 $702.78. At the end of the loan period, you will have paid $234,999.37 in interest. Since your extra payment will get your interest paid off sooner, you will save $8,750.63 in interest by paying an extra $50.00 each month. This will reduce the balance of your $250,000.00 loan to $232,000.00, which will result in $18,000.00 in loan appreciation.