|Mortgage repayments...by Gareth
If you have a loan due off its fixed term soon it will highly likely be coming off a higher rate than what’s currently available.
If you are making Principal and Interest (P&I) repayments the minimum repayment will go down, the key will be to keep the repayment the same as it was (or higher if you can). You will be used to paying that amount already and it will have a big impact –
$450,000, 25-year term, fixed 12 months ago for a year at say 3 % had minimum payments of $2,134 per month.
The loan balance is now $437,725 and the 1-year rate is 2.29%*. The new minimum payment is $1978 per month.
Keeping the repayment amount the same as it was at $2134 means an additional $156 per month is being paid off the loan balance. This reduces the loan term down to 21 years 9 months and saves $13,226 in interest over the life of the loan.
That’s quite a big saving for not really changing how you do things!