BLUF: Understanding and tracking your mortgage is simple to do, the linked template spreadsheet provides a clear view of principle, interest, and the effect of extra payments identifying exactly when you will be mortgage free!
Can you answer these questions?
- Do you know exactly how much of your mortgage payment goes to principle and what goes to interest?
- How much it changes each month?
- When will you be paying more principle than interest?
- Do you know the effect of paying an extra $100? What about another $1,000 or $5,000?
- Do you know the exact month your mortgage will be paid off?
- Are you assuming that your mortgage company is calculating everything correctly?
These were questions I had when we were about to sign the papers to our first mortgage many years ago. I wanted to know exactly what I was getting myself into. Also, I had no plans to wait 30 years to pay off our house.
Side note: The decision to pay off a mortgage early is continuously questioned and debated on every personal finance website, forum, book, and / or whatever else. The decision to pay off your mortgage early is a completely personal decision. It comes down to many factors which I am not going to debate here.
30 Years – No Thanks
For our situation, we wanted to have one house “free and clear” before we bought a second. It had to do with balancing risk and ensuring we could always pay the mortgage, no matter the situation. No matter if there was a financial crash, either of us lost our job, or there was some other unforeseen disaster. My empathy for those who signed up mortgages and later could not afford them is low.
Information is power and I wanted to have all the information I could about the massive debt I was about to agree to. I started to check out the online calculators that simply showed monthly payments and total interest. They did not break down the life of the mortgage enough for me; therefore, I made my own calculator to track my own mortgage.
My Own Mortgage Calculator
I designed my own mortgage calculator which answered the questions I was asking. The calculator shows every mortgage payment and the effect of paying a little more. It shows exactly when the mortgage would be paid off.
It later assisted us with purchasing our second house, because it clearly showed the effect of putting a larger down payment down or adjusting the interest rate.
You are welcome to make a copy and use and edit for yourself. It is very easy to use.
Enter your information in the light blue boxes.
Many things will autofill, adjust to fit your needs.
It also includes the taxes and insurance if you have that info.
Then you can add “Extra Payments” to see the long-term effects.
The calculator will automatically show the effect of extra payments. By paying another $100 each month (and that random $300 and $1k in Apr and Mar), the mortgage will be done in 21 years verses 30 years.
I recommend making a calculator for all major debt you have, including a vehicle loan. Nothing about a mortgage or loan is magic, it is very simple math. Let me know if you have any questions. Good luck!