A year in review

Sometimes a good motivation to change needs to be reinforced by looking at the past. If you were to look back at where you were 1 year ago you can decide whether or not you are happy with the changes.

Reviewing your mortgage can be quite enlightening. Let’s observe a mortgage at various stages, using the following assumptions, $360k initial mortgage on a 30 year term at 6%.

• If the mortgage was 3 years old; current balance would be $345,902.65 with total principal paid off in the last year of $4983
• If the mortgage is 7 years old; current balance would be $322,701.79 with total principal paid off in the last year of $6331
• If the mortgage is 15 years old; current balance would be $255,775.84 with total principal paid off in the last year of $10219

For each year the total loan repayments over the last 12 months would be $25900. So, especially if you are 3 or 7 years in, you are making a considerable amount of mortgage payments while not making a significant amount of difference to the principal.

Now this loan repayment schedule is reliant on you simply following the default payment plan from your lender. You are not obliged to do this, unless you have fixed your entire mortgage, and it certainly is not in your best interest to follow this default (or minimum) repayment schedule. Being able to offset some of the interest cost, making extra repayments and reducing your term will all have a positive impact.

So do you chose to maintain the status quo (your bank will thank you) or do you make a positive change?