Deciding

A worked example

The scenario

A $425,000 balance on a 30-year fixed mortgage at 6.5%, with $15,000 of monthly take-home household income and $9,750 of monthly expenses — a surplus of $5,250, or 35% of income.

That surplus figure is the number to pay attention to. It is what makes the illustration work, and it is deliberately a strong one.

The standard path

Held to term, the mortgage costs roughly $542,000 in interest, for about $967,000 paid in total over thirty years.

The interest-to-principal split in month one is about 86% interest to 14% principal. The crossover, where principal finally exceeds interest, lands around month 233.

The velocity banking estimate

Running the same income and expenses through a first-lien line, the estimated payoff is around nine and a half years, with roughly $167,000 in total interest — an estimated difference of about $375,000.

Those figures are deliberately conservative. Modelled directly with daily accrual, the same inputs produce a slightly faster payoff and slightly lower interest. The published set understates rather than overstates.

What this illustration does not show

It assumes the rate holds. It assumes income and expenses hold. It assumes the surplus is applied every month without exception, for years.

Change the surplus and the outcome changes dramatically — far more than changing the loan size does. Surplus is the variable that matters.

Figures are estimates for illustration only. They depend on the input figures staying accurate over a period of years — income, expenses and the rate — and on staying within budget every month. Your numbers will differ.