Do the arithmetic on your mortgage before you sign

Take a $300,000 loan at 6% fixed over 30 years. The principal and interest payment is about $1,799 a month. Multiply that by 360 months and you get roughly $647,500. You borrowed $300,000 and you'll hand back about $347,500 in interest on top of it.

That's the number nobody puts on the yard sign. And it's the number you should be able to produce yourself, in about forty seconds, before you're sitting at a closing table with a pen in your hand.

This is general education, not advice about your situation. Your rate, your taxes, your income and your tax treatment are yours. A licensed mortgage professional and a tax professional can tell you what applies to you.

The one formula worth memorizing

Open a spreadsheet. Type this:

=PMT(0.06/12, 30*12, -300000)

You get $1,798.65. Change the rate, change the term, change the loan amount. That's it. That's the whole machine.

Then multiply the result by the number of months. That's your total of payments, and in the US it's printed on the Closing Disclosure you receive before closing, along with a figure called the Total Interest Percentage. Read both. People skim the monthly and never look at the other two.

Now run the same loan at different rates so you can feel what a rate point is worth:

• 5% — $1,610 a month, about $579,800 total
• 6% — $1,799 a month, about $647,500 total
• 7% — $1,996 a month, about $718,500 total

One percentage point is roughly $190 a month and roughly $70,000 over the life of that loan. That's what you're negotiating for when you shop three lenders instead of one. Not a favor. Seventy thousand dollars.

Where the money goes in the early years

The first payment on that 6% loan breaks down like this: $1,500 of interest, $299 of principal. You wrote a check for $1,799 and moved the needle by less than three hundred dollars.

It gets better, but slowly. Here's the part that surprises people who've never pulled an amortization schedule: after fifteen years of on-time payments — half the term, $323,000 out the door — you still owe about $213,000 on a $300,000 loan.

You paid a third of a million dollars and retired $87,000 of debt.

That's not a scam. It's just how interest on a declining balance works. But it explains why moving every five or seven years is so expensive. You spend the front half of every loan mostly renting money, then reset the clock on the next house and do it again.

Fifteen years versus thirty

Same $300,000, same 6%, 15-year term:

• Payment: about $2,532 a month
• Total of payments: about $455,700
• Interest: about $155,700

You pay $733 more a month and save roughly $192,000. Shorter terms also usually carry a slightly lower rate, which improves the comparison further.

The trade-off is real and it isn't only about interest. The 15-year payment is mandatory. If your hours get cut or a transmission dies, the bank doesn't care that you were ahead of schedule. A 30-year loan with extra principal paid voluntarily gives you most of the savings and all of the flexibility — as long as you actually make the extra payments.

Which brings up the honest question: will you? Some people need the forcing function. Know which kind you are, and don't pick the payment that assumes a better version of yourself shows up every month for fifteen years.

What an extra $200 a month does

Take the 30-year loan and send $1,999 instead of $1,799, with the extra applied to principal.

The loan pays off in a little over 23 years instead of 30. Total interest drops by roughly $90,000.

Two hundred dollars. That's a truck payment you didn't take on, or one meal out a week. Front-loaded extra principal is the highest-leverage money in the whole schedule, because every dollar you kill early is a dollar that isn't accruing interest for the next twenty-nine years.

Two mechanical notes. Write "apply to principal" on the payment or select that option in the portal, or some servicers will just hold it toward next month's bill. And check that your loan has no prepayment penalty — most don't, but read the note.

The costs that aren't interest

Principal and interest is the part people compare. It's often not the biggest part of the increase to your life.

• Property taxes. Assessed on value, and they move. They go up when the district reassesses, and a fixed-rate loan does nothing to protect you.
• Homeowners insurance. Also moves, sometimes sharply, depending on where you live and what carriers are doing there.
• Mortgage insurance. If you put down less than 20% on a conventional loan, expect it. It buys you nothing. Know the balance or the date at which it drops off, and ask about it — servicers don't always volunteer it.
• HOA dues, if applicable. Not escrowed. Not optional. Can be raised.
• Maintenance. The common planning rule of thumb is 1% to 2% of the home's value a year. It's a placeholder, not a measurement — some years are zero, then the roof goes. On a $350,000 house, budgeting $250 to $500 a month toward eventual repairs is a reasonable way to keep a water heater from becoming a credit card balance.
• Closing costs, on the way in and again on any refinance.

So your "fixed" payment isn't fixed. The P&I is fixed. Escrow drifts up most years, and the maintenance line is invisible until it isn't.

Refinancing and points, in one line each

Refinance break-even: closing costs divided by monthly savings equals months to break even. Pay $6,000 to save $250 a month and you're even in 24 months. Stay four years and you're ahead. Move in 18 months and you paid for the privilege.

The catch nobody mentions: refinancing into a fresh 30-year term restarts the amortization. Your payment drops, your total interest can still go up. Compare total of payments, not monthly payments, and ask about matching the remaining term.

Points: you pay cash up front to buy the rate down. Divide the cost by the monthly savings, same arithmetic. If the break-even is 70 months and you expect to be gone in four years, it's a bad trade.

Prepay or invest

This is where people want a rule and there isn't one.

Paying down a 6% mortgage is a guaranteed 6% return, and guaranteed is worth something. Money in the market isn't guaranteed and historically has done better over long stretches. A retirement account with an employer match is in a different category again, because a match is an immediate return you can't get anywhere else.

Mortgage interest is only deductible if you itemize, which many people don't. Don't assume the deduction is doing work for you. Ask a tax professional whether it does in your case.

Most households land somewhere sensible: capture the full match, keep an emergency fund that actually covers a job loss, then split anything extra between investing and principal in whatever proportion lets you sleep.

Before you sign anything

Pull the amortization schedule for the exact loan you're being offered. Not a generic one. Yours.

Look at month one and see what fraction of your payment touches principal. Look at month 180 and see the balance. Multiply the payment by the term. Then decide whether the house is worth that number, because that number is the price — not the one on the listing.

A house you can afford at the total-of-payments level is a house that doesn't own you back.