Borrowing money can be an expensive proposition. Even at relatively low interest
rates, you may be surprised at the amount of interest you pay over the life of a
loan. This calculator is designed to help you estimate the true cost of that loan
you may be considering.
The results below show the monthly payment amount, the interest cost, and the potential
tax savings (if the interest on your loan is tax deductible) for the loan you are
considering. It may surprise you to learn that for a long-term loan, such as a 30-year
mortgage, you could pay more in interest over the life of the loan than
you originally borrowed. For example, if you borrow $100,000 at 6% over a
30-year period, you would pay $115,838 in interest — more than the amount you
initially borrowed — bringing the total pay-back amount to $215,838.
This chart shows how much the balance of your loan will be over the time period
you are making payments. You’ll see that in the early years of the loan, the
principal you owe is reduced more slowly than in the later years of the loan. The
longer the loan, the more dramatic this effect is. This is because in the early
years, a greater portion of your payment goes toward interest on the balance of
the loan; as the balance of the loan is reduced, the interest accrued each month
is reduced, and more of your payment amount is credited to the loan principal.
This hypothetical example is used for illustrative purposes only. Actual results will vary.
This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
This material was written and prepared by Broadridge Advisor Solutions.
© 2021 Broadridge Financial Solutions, Inc.