Snowballing certainly has its benefits, but i’m wondering if there is a better way to reduce total interest expenses.
Given that that 2/3 rds of interest is paid in the 1st ten years of a 30 Fixed mortgage, there is a timing aspect that comes into play. For example an extra payment on a 4.75% interest loan in the last year of amortization may save you hundreds, while an extra payment on a 3.75% loan in the first year of amortization may save you tens of thousands.
With the goal of reducing total interest expense, I’m considering a strategy of paying at least as much principal each year as interest. In this scenario, I’ll pay extra on newer mortgages but nothing extra on older mortgages where the majority of my payment is already going to principal. While, it will take longer to close mortgages, mathematically I believe it will save interest expense.
For the sake argument let’s say I have 5-6 mortgages all 30 fixed with rates between 3.25% and 4.75%.
Anyone else thinking along these lines?
Yes, you save more “total money” by paying extra on mtgs in the early years. But....no matter at what point you pay it, the annual yield/return to you on your money is Exactly whatever the interest rate on that loan is.