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If you take out an interest only loan and then make additional payments, you might be able to save yourself some money over the long haul. If you take out a 30 year loan for CAD 250,000.00 with a 5.000% interest rate, for example, the monthly payment would be about CAD 1,041.67. This means you will pay CAD 375,000.00 in interest at the end of the loan term. If you pay an extra CAD 50.00 per month, however, your average monthly payment will not be much more, only CAD 1,043.97. At the end of the loan period, you will have paid CAD 357,828.02 in interest. Since your extra payment will get your interest paid off sooner, you will save CAD 17,171.98 in interest by paying an extra CAD 50.00 each month. This will reduce the balance of your CAD 250,000.00 loan to CAD 232,000.00, which will result in CAD 18,000.00 in loan appreciation.
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