Mortgage pay down question

[Rain Man]

Okay, here goes.

I estimated your baseline scenario of not paying either one of them down. Based on your numbers, I'm guessing that you have roughly 69 more payments on Mortgage 1 and 259 more payments on Mortgage 2.

The total interest that you would pay in the Baseline Scenario is approximately $77,580.64. Since most of this is paid in the future, the current time value of that is $63,841.73.


In Scenario 1, paying off the smaller mortgage, you have 0 more months on Mortgage 1 and roughly 190 months on Mortgage 2 since you're paying more on principal each month. Your total interest payments are $68,988.39, and if you discount for future inflation, the current value of that is $57,990.63.

In Scenario 2, paying down the larger mortgage, you have 69 more months on Mortgage 1 (which is unchanged) and roughly 204 months on Mortgage 2. Your total interest payments are $64,757.06, and if you discount for future inflation, the current value of that is $54,226.98.

It gets goofy since your interest rate changes midstream on the larger one, but I think I made a good estimate of that.

This result assumes that your mortgage interest payments recalibrate on Mortgage 2 to reflect the lower principal you owe after the paydown. I think most modern mortgages work this way, at least in terms of residential mortgages. If not, then you're better off paying Mortgage 1 off, but I don't think mortgages have fixed-interest payments any more.

Poorly documented spreadsheet attached if you want to review my numbers and assumptions.