Did you know you can use your tax refund to make a bigger payment on your mortgage, if permitted by your financial institution, and save thousands of dollars in interest?
Budget Express provides a practical calculator that enables you to see the benefits of this operation.
Here is an example. Let’s suppose you make monthly payments on a $200,000 mortgage over 25 years at 4% interest.
2- In the Estimate menu, choose « duration».
3- Type the remaining amount on your mortgage next to Original amount (in our example, 200,000), and the interest rate next to Annual rate.
4- Type your monthly payment in the following box (ex.: 1055.67), then click Calculate.
5- At the bottom right of the window, you can see the cost of loan. In our example, it is just a little over $116,700 (if no parameters change over time, of course!).
Now, imagine you can make a $5,000 extra payment.
6- Change the Original amount value by removing 5,000 (which becomes $195,000 in our example).
7- Click on Calculate again and see the effects on the cost of loan.
In our example, we can save about $ 8,723 in interest at the end. If you repeat this every year, the savings will become substantial. As a bonus, if you don’t change the amount of your monthly payment, you will repay your loan much faster!
To make such simulations, start Budget Express, go to the Tools menu and select the Loan calculator. It allows to simulate various parameters such as monthly payments, term or borrowing capacity, in addition to seeing the interest you pay on a loan.