Handy Tip - Mortgage Costs Are Proportional

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Handy Tip - Mortgage Costs Are Proportional

A handy tip to remember is that if the term and interest rate stay the same, then the mortgage costs are proportional to the amount borrowed. In other words, if you borrow twice as much, your payment will be twice as high, and so will your total interest.

This tip can help you make rough estimates of what would happen if you raise or lower the amount borrowed.

Here is an example. All three of these mortgages have a 15 year term and a 6% rate. The first chart shows $50,000 principal, the second shows $100,000, and the third shows $200,000.

With a principal of $50,000, the monthly payment is $422 and the total interest paid is $25,947.
If the principal doubles to $100,000, the monthly payment also doubles to $844 and the total interest paid is also doubled to $51,894.
If the principal quadruples to $200,000, the monthly payment quadruples to is $1688 and the total interest paid is also quadrupled to $103,788. Remember - this only works when the term and rate stay the same.