Adapt MoneyClub.com’s Dollar-a-Month Plan. ” If you have a 30-year fixed rate mortgage for $150,000 at 6% today, just add an extra dollar to your $900 payment each month — $1 the first month, $2 the second month, $3 the third, and so on.”
You’ll end up paying off your 30-year loan in 22 years (just be sure your loan has no prepayment penalty).
Savings: Over 30 years, interest would probably total about $174,000; using the Dollar-A-Month plan, you’d pay approximately $122,000, an impressive savings of $52,000! Now that’s something to be happy about!
Hmm… Let’s see:
22 years = 22 * 12 months= 264 months.
I ran the numbers and instead, I got 275 months, which is 23 years and 1 months. Still not bad.
However, if you do the opposite, and first month add $275 the first month, $274 the second, $273 the third, etc, you’ll be done in 239 months, i.e. 11 years and 11 months!!! Which is 18 years early!!!
Or, you can just get a 15 yr mortgage with lower interest (about 4.5%), and have a payment of $1,147.49 per month (and be done in 15 yrs no matter what).
If you stick with a 30 yr mortgage, I believe that in frum reality, the second plan should make more sense since usually expenses keep increasing (more kids, more daycare, tuition, college, etc) as opposed to decreasing.