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PSA, you will actually pay $1M for your $500k house at today's rates (lemmy.world)
submitted 1 year ago by to c/personalfinance@lemmy.ml
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This might be duh for some people, but if you're like me and considering a mortgage; at today's rates in the US at around 5-6%, over 30yr mortgage you will pay about same in interest as you will for your house price.

Your $500k house will cost you around $1M total over thirty years.

I was surprised.

https://m.mortgagecalculator.org/?q=A1Nzy-8KX

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[–] 23 points 1 year ago (5 children)

You might also be surprised to know that increasing your payments a little can shave off a lot of interest. Paying 10% extra on your payments saves you about $100k of interest on your $500k loan at 5%, and pays it off about 5 years earlier.

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  • [–] 18 points 1 year ago

    Anything above and beyond the monthly payment can go towards the principal, which is an especially big deal at the start of the mortgage. But be sure to verify that the bank is actually applying it all to the principal as you intend.

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  • [–] 2 points 1 year ago (2 children)

    Unless you have offset accounts, in which case it's better to hold surplus liquid that offsets the amount owing before interest calculation

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  • [–] 1 point 1 year ago (1 child)

    That works, but I don't know if "better" is the right word. If you have the same amount offset or paid off, it's the same outcome. The only difference is if you offset then you can spend it - for better or for worse.

    You could also bump your payments up and use an offset account for any extra.

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  • [–] 2 points 1 year ago

    Offset is generally considered better because if you have an emergency or financial opportunity you still have access to cash. If you put extra into repayments you're forced to redraw or refinance if you suddenly need funds.

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