--- In FairfieldLife@yahoogroups.com, new.morning <[EMAIL PROTECTED]> wrote: > > --- In FairfieldLife@yahoogroups.com, "suziezuzie" <msilver1951@> > wrote: > > > > This is totally off the topic so I expect some really, good off the > > topic responses. I bought a house two years ago here in beautiful > > Colorado and throughout that time, the more I thought about the loan, > > the madder I started getting, specifically, paying all the interest > > up front. I borrowed a little over $100K and came up with the rest. > > The total cost of the house was $233,000. > > > > What these banks do is charge you all the interest up front. > > The banks are not front-loading interest. They are charging interest > on a "pay-as-you-go" basis. That is, they are charging interest on the > outstanding principal. No more, no less. As the principal declines, so > does the interest on the remaining principal.
This is true for short term loans only, not 30 year fixed loans. It appears on my statements that the interest IS frontloaded for example on a loan of $117,000, for two years now, I've paid $20,000 in iterest and $3000 in principle. The $900 a month I'm paying is paying off mainly interest first for the first ten years (approximately). If I were to increase the principle amount of payback, they would recalculate the interest and it's true that a higher percentage of the principle would be coveredt. Mark http://www.refinance-refinance.net/2006/04/10/mortgages-for-dummies- mortgage-term-length.html > For example, in the last boom phase of the real estate market, > "interest only" loans were prevalent --- at least they were "interest > only" for the first 5 years or so of the loan. Thus, for a $100,000 > principal, $6,000 of interst would be paid (assuming annual payments > -- a simplification for this example.) For five years, no principal is > paid off. > > On the other had, a 30 year loan requires / allows the payment of the > same interest as above, plus some repyament of principal, structured > so that the full principal is paid off in 30 years. Again following > the same principle, that interest is charged on the outstanding > principal in each payment period. > > A 15 year loan pays back more principal each payment period. A 5 year > loan even more so. > > If you want to pay less interest, simply pre-pay down your principal > each month. If the mortgage payment is $1000, pay that, plus $500/ > month principal paydown. You will end up shortening the term of the > loan -- and end up paying less interest. >
