In two scenarios, Shawn prepays $10,000 towards his mortgage. Let’s compare.
In both scenarios, Shawn prepays $10,000.
- He saves $48,984 and 3.13 years in scenario 1.
- He only saves $11,051 and 1.13 years in scenario 2.
So, what’s the difference? Why did he save so much more in scenario 1? The only difference is time. The earlier you get out of debt, the more you will save. The later you get out of debt, the more interest you will pay.