Here is the Excel file http://groups.yahoo.com/group/FairfieldLife/files/Local%20Services/
--- In FairfieldLife@yahoogroups.com, new.morning <[EMAIL PROTECTED]> wrote: > > --- In FairfieldLife@yahoogroups.com, "suziezuzie" <msilver1951@> > wrote: > > > > --- In FairfieldLife@yahoogroups.com, new.morning <no_reply@> > > wrote: > > > > > > --- In FairfieldLife@yahoogroups.com, "suziezuzie" <msilver1951@> > > > wrote: > > > > > > > > > > > > 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. > > Not true. The principle is the same. If you have a teaser low interest > loan for the first 5 years, or an ARM, or other more complex loan, > then its a slightly different structure -- but the principle is the > same -- you pay interest on the outstanding principal. > > You and the author of the link you gave appear to feel that because > initial interest payments are more than principal in the first years > of the mortgage, that it is "front loaded". Thats an odd definition of > front-loaded. Front loaded traditionally means paying MORE interst > than is warranted by what is due on remaining principal. > > Create a payment and interest stream in Excel or Google SS and you > will understand whats going on. > > I have put an excel ss that mimics your case in the FFL files > "Service". Actual interest does not sink to the level of principal > until year 21. But that is NOT front loading in the traditional > finance sense of the word. > > > > > > > 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. > > > > > >
