I'm not really good with interest rates, so I'm hoping someone can check my math here:
Scott and I have been bouncing around the idea of taking $4,000 of our new home buyer tax credit and dumping it straight back into our mortgage. Our interest rate is 5%. So 5% of 4,000 is 200. Now this is the part where I'm fuzzy. That's 5% annually, right? So $200 per year over 30 years is a savings of $6,000?
That's a lot of money!
A quick look at our most recent mortgage statement shows me that only $172 of our monthly mortgage payment actually goes to the principal, with 4x that much going to interest and the rest going into the tax/insurance escrow account. So $4,000 is like 23 months of principal payments. Right? Wow, that's insanity!
Plus, when we can afford to do so, I over-pay by $150-200 each month, and that goes to principal. So...if I do that every month, does that mean our 30-year mortgage would be paid off in 15? That can't be right!
I'm done geeking out with numbers. If I'm way off, will someone please let me know I shouldn't be so excited? Thanks!