Despite the loan being at $871,046, your payments are still based on the original $1 million principal. By reamortizing the loan, your payments are based on a loan of $871,046. So it would look like this:
- Original principal: $1 million
- Original payment (4%): $5,278/month
- New payment (6.75%): $6,909/month
Then:
- First renewal principal (6.75%): $871,046
- First renewal payment (6.75%): $6,018/month
Then:
- Second renewal principal (6.75%): $713,594
- Second renewal payment (6.75%): $4,930/month
Yes, you will pay off less principal, but in a market where cash flow is more and more difficult to come by, that is really a secondary concern. Even after just five years, the increased payment after reamortization is less than half what it would have been. At the 10-year mark, the payment would be less, despite the interest rate going up almost three percentage points.
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