What Is That Loan Costing You?

[John Thedford]

I just closed on a SFR rental. The seller agreed to carry paper. Terms: 160K, 20 years, 4%. Though these terms are fairly good, many investors may not realize how much interest they are paying. Hey, if you want the writeoff and are good with paying interest, then this post may be of no interest. Looking at my amortization schedule for this property, this is the breakdown:
Principal: $160,000
Interest: $72,696.33
As you can see, I will pay ALMOST 50% of the principal over the term of the loan. It adds up!

If I was a younger investor, I would definitely want to stretch out the time on mortgages. As one gets older, they may find it prudent to lower their debt. The only want to do that is by prepaying on the principal on mortgages such as this. I am DEFINITELY go to prepay on a couple of mortgages with higher interest rates (7%) and once those are paid off I will tackle this one. I am not concerned as much as having writeoffs at this point. My main concern is getting debt free and increasing income. If you have a mortgage, how much are you paying in interest? Have any clue? Pull our your amortization schedule, take a look, and make changes you may feel necessary.