the real cost
What's Your Real Mortgage Cost Including Principal & Interest? You Do The Math! |
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| Let's begin by establishing the facts: | |||
| No. | |||
| What was your mortgage at the time of purchase? | 1 | ||
| What is your present mortgage balance today? | 2 | ||
| What is your payment per month? (not including taxes or insurance) | 3 | ||
| 4 | |||
| What is your original mortgage amortization | 5 | ||
| How many years left to pay your mortgage today? | 6 | ||
| How many years have you lived in your home? | 7 | ||
| How much is it going to cost all total? | |||
| Monthly payment (#3): $ x 12 months = Annual payment | 8 | ||
| Annual payment (#8): $ x Amortization (#5) = Total P&I | 9 | ||
| Subtract your mortgage balance at purchase: (#9 - #1) = Your total mortgage interest costs | 10 | ||
| This interest is paid in after tax earned income (#10) | |||
| How much is it going to cost before taxes? Or how much income must I work for to pay off this mortgage debt? | |||
| For the answer to this question, divide your total principal & interest payment (#9) by the reciprical of your tax bracket. (35% bracket divide by .65) (40% bracket divide by .60) (50% bracket divide by .50) Average bracket is 35% |
11 | ||
| The amount you must earn before taxes to pay off your mortgage is: (#9 divided by #11) | |||
| Additional costs over & above your original mortgage principal borrowed = (#12 minus #1) | 13 | ||
| Where does all this money go? Here's the breakdown | |||
| The Government: (income taxes paid) | A | ||
| The Bank: (mortgage interest costs) | B | ||
| You: (borrowed mortgage principal paid) | |||
| Your toal legally obligated costs to pay off your mortgage | D | ||
| How much have you already paid your bank since purchase that you will never get back? | |||
| Annual payment (#8) x (#7) years you have lived in your home = Total costs to date: | |||
| Principal paid to date: (#1 minus #2) Original mortgage balance minus present balance = | |||
| Mortgage interest - (#14 minus #15) = Mortgage interest paid to date: | |||
| How much income have you had to earn before taxes to get to this point? | |||
| Total cost (#14) divided by bracket reciprocal (#11) = Amount you've had to earn to date: | 17 | ||
| Subtract Principal to date from the amount you had to earn (#17 minus #15) = current borrowing costs: | 18 | ||
| Number (#18) above illustrates your borrowing costs before taxes to date | |||
| Do you really want to carry on this way? It is going to get a lot worse before it gets better! | |||
Note: A constant interest rate is assumed for purposes of this illustration. Fluctuating rates will change your figures. |
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| What's Your Real Cost Copyright 1997-2003 by Charles S. Bell I. All rights reserved. | |||
