Calculating How Much Interest I Pay Monthly

by Evan

I originally calculated how much interest I was paying to finance companies and banks in 2009.  Re-reading the post I actually remember feeling very annoyed how much money was being spent just servicing my debt.  While I updated the numbers some 19 months later, I haven’t looked into these calculations in over 4 years.

Calculating Monthly Interest Paid on my Debt

Below is what my debt servicing looked in 2011 (as compared to 2009):

Debt Monthly Payment Principal Portion Interest Portion Difference From 19 Months Ago
Mortgage Payment $1,259 (without Taxes) $183 $1076 $44 More towards Principal
Student Loan #1 $252 $82 $170 $82 More Towards Principal
Student Loan #2 $106 $80 $26 $5 More Towards Principal
Auto Loan* $221 $198 $22 $92 Will be paid off by the End of the Month
Total $1838 $543 $1,294 $204 Less Interest Per Month

 

Wow things have changed since that post was written! My 4 year old boy was about the same age as my 6 month old daughter is currently.  Focusing on monetary changes:

  • The auto loan was paid off years ago
  • Student Loan #2 was paid off
  • The mortgage is much larger

Current debt servicing:

Mortgage Payment $1,047
Student Loan #1 $140

So the total is a couple hundred less than a few years ago.

Two interesting things came from this exercise.  One, despite the mortgage being larger the interest payment is actually lower because of the reduction in interest rates.  Two, the student loan ratcheted up at some point between today and that post so the payment is actually higher (from $252 to $334/mo).  So, it means even more is going towards principal today.  Both of these are 30 year notes at fixed terms below 4% so this doesn’t seem like an exercise I would undertake again in the near future.

 

Have you ever actually calculated this number? It has to be even more infuriating if you have non-0% credit cards.

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2 comments

Vivianne March 25, 2015 - 10:26 pm

I calculate this number when I do taxes. Getting my education using student loan was one of my best investment. I’m no longer qualified to deduct the student loan interest. I’m not worried about this number. I pay $1000 in student loan interest, and I can bring home 60x that amount per year, I’m ahead. It’s a great investment.

As for the mortgage interest, for my investment property, the number I’m looking for is the CAP rate or ROI. The rest are just expenses. How full my apartment need be to break even, that’s the number I worry about. 🙂

With that said, it’s is mind blowing to see a $250k mortgage and you’ll have to pay $500k in principle and interest. Mortgage is the largest expense, people often associate a payoff mortgage to retirement. But if you can live in a duplex or triplex, your renters pay the mortgage and all the expenses associate with housing… It’s just expenses, and you just focus on how much principle you are collecting each month.

People in New York City are used to share the wall, then you have people in small city like me want land and privacy 🙂 everything has a cost of oppotunity, how much you are willing to pay for it. Convenience, privacy, the investment oppotunity loss if you try to pay off the mortgage early, etc. people risk tolerant are different. No decision are bad decision.

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Evan March 31, 2015 - 9:00 am

I had to learn the hard way that student loan interest deductibility is based on income – https://www.myjourneytomillions.com/articles/education-loan-interest-not-always-tax-deductible/.

“No decision are bad decision”
– I couldn’t agree more! Just thinking through a problem and coming up with your logical outcome/reasoning in it of itself is usually more helpful than adopting the ostrich approach.

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