Ramit Sethi walks through a $500,000 mortgage at 5.5% over 30 years. Monthly payment: about $2,800. In year one, 75% goes to interest, not principal. Over the life of the loan, you'll pay $522,000 in interest alone.
$500,000
5.5%
30 years
~$2,800 per month
About 17 years
When you buy a house, it takes years to start building any meaningful amount of equity. Let's say you have a $500,000 mortgage. You have a 5.5% interest rate and a 30 year loan. Your mortgage payment would be roughly 2,800 bucks a month. Do you know how long it takes until you start paying more towards your mortgage? 17 years from now, in the first year, you're paying 75% of your money to to interest. And some of you guys are so brainwashed you're worried about paying someone else's mortgage. But you never stop to run a single calculation which would tell you you're paying the bank's interest. You will have paid $500,000 for the house and $522,000 in interest. Learn to run one simple calculation before you make the biggest purchase of your life.
