Mortgage Payments

Notes

• The quoted payment is not the bill. $2,844 is principal and interest. Property tax, homeowner's insurance and — under 20% down — private mortgage insurance are collected alongside it, and on this loan they add roughly $333 to $1,308 a month.
• Property tax is the biggest variable and it is geographic. Effective rates run from about 0.3% of value in the lowest states to over 2% in the highest — a factor of six on the same house. That single line moves the monthly bill here by roughly $750, which is more than a full percentage point of interest rate.
• Where the money goes early on. The first payment is $2,438 interest and $407 principal — 14% of it reduces the debt. The crossover, where principal first exceeds interest within a single payment, arrives around year 19 at this rate. That asymmetry is why an extra payment in year two is worth many times the same payment in year twenty.
• Fifteen years costs $1,076 more a month and saves $318,353 in interest. Whether that is a good trade depends on what the extra $1,076 would otherwise do — which is a different question from which loan is cheaper.
• Payment scales linearly with the amount at a fixed rate: $6.32 per $1,000 borrowed at 6.5% over 30 years. That shortcut works for any figure, not just the round ones.