How Much Interest Will You Pay?
Only 20% of Canadians know how much interest costs on a 25-year mortgage, according to a TransUnion poll.
Those surveyed were asked what percentage of the original loan amount they'd pay in interest over 25 years. They were given various ranges to choose from. The correct range was 151-200% of the original loan amount.
It didn't matter whether the respondent was a man or woman, or whether they owned a home. In all cases, only about 1 in 5 answered correctly.
Canadians with a university education did slightly better in the survey. Overall, however, 45% underestimated the total cost of interest over 25 years.
Once people know how much interest costs, they typically ask how they can minimize it. Here are a few examples along with some sample interest savings (based on a $250,000 mortgage, amortized over 25 years at 5.79% interest):
- Make weekly payments (savings: $40,181)
- Reduce amortization from 25 to 20 years (savings: $50,264)
- Put down an extra 5% (savings: $22,053)
Do all three and you'll save a whopping $91,379 over 25 years!
Of course, doing even one is often easier said than done.
