A Box Score for Your Financial Future

Roger Schlesinger
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Posted: Aug 13, 2013 12:01 AM
A Box Score for Your Financial Future

Read It and Reap. 

The box score is designed to allow you to look at the leaders, in loans, that few borrowers ever take the time to do. The box score will show you how the loans work, how long you work for them and how long it takes for the loans to start working for you. Once you digest the information you can ignore it, file it away for future use or let your impulsive side figure a way to put this information to use for you. The 4 loans that will be featured in the box score are the 30 year fixed, 25 year fixed, 20 year fixed and the 15 year fixed. I have used the current rates for our best borrowers for each loan. The box score will show the payment, the breakdown between principal and interest of the very first payment, the breakdown after 5 years, how long it takes for the principal payment to equal the interest payment and how long to pay off half the loan.

Box Score

Loan

Interest Rate

Mo. Payment

Principal

Interest

Time Factor

30Year

4.375%

$1498

$404

$503

$750

$1094

$995

$748

1payment

61st payment

14 years 3 mo.

25 Year

4.375%

$1640

$552

$687

$824

$1094

$953

$822

1st payment

61st payment

9 years 3 mo.

20 Year

4.250%

$1858

$795

$929

$1063

$929

1st payment

3 years 9 mo.

15 Year

3.375%

$2126

$1282

$844

1st payment

The Halfway Point

30 Year This loan takes 14 years, 3 months to have principal & interest equal. It shouldn't be a surprise that it takes 19 years to pay off half the loan.

25 Year This loan has the same interest rate as the 30 but only takes 9 years, 3 months for the principal to catch the interest. 15.5 years to payoff half.

20 Year This loan reaches equality between the principal and interest payments in 3 years, 9 months and pays off half the loan in 12 years.

15 year This loan has an excess of the payment going to principal from the first payment and pays off half in 8 years, 6 months. That is faster than the 30 year & 25 year needs to reach equality for their principal & interest payment.

Regardless of which loan you choose you only have to pay back $300,000 in principal plus the interest on the loan. The amount of interest is determined by the length of the loan and the interest rate. Although you have seen how long it takes for the principal payment and the interest payment to even up, as well as how long it takes to payoff half of the loan you still will be surprised at the total interest you pay for the given loan.

Total Interest

Loan Type

Total Interest Paid

% of the loan amount

30 year fixed

$239,226

79.7%

25 year fixed

$193,885

64.6%

20 year fixed

$145,849

48.6%

15 year fixed

$82,730

27.5%

Obviously one loan stands out alone as the one most people would choose if they could. There are many reasons to make borrowers shy away from the obvious best loan, but if they concentrate on two facts they may have the will power to go forward with a shorter loan. Those two facts are: the shorter the loan the lower the overall cost, even if the monthly payment is higher and once you are done with the loan you have years without payments that can be used for investment instead of paying the additional payments on the loan that has only one thing to offer -a lower monthly payment.

Additional Savings 

This is the last table and will show you how much you will save by paying your loan off faster than 30 years. You have already saved money because you have paid a lower amount of interest. This is the amount of the payment you won't make times the months you don't have to pay.

25 year loan

$1640 for 5 years

$ 98,400

20 year loan

$1858 for 10 years

$222,960

15 year loan

$2126 for 15 years

$382,680

Now that you have seen it in black and white the "Road to Financial Freedom" awaits.