--- In [email protected], "suziezuzie" <[EMAIL PROTECTED]> wrote: > > --- In [email protected], new.morning <no_reply@> > wrote: > > > > Here is the Excel file > > > > http://groups.yahoo.com/group/FairfieldLife/files/Local% 20Services/ > > > > --- In [email protected], new.morning <no_reply@> wrote: > > > > > > --- In [email protected], "suziezuzie" <msilver1951@> > > > wrote: > > > > > > > > --- In [email protected], new.morning <no_reply@> > > > > wrote: > > > > > > > > > > --- In [email protected], "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. > > > > > I never heard the term front loaded before so I thought you were > using it to mean what we're talking about, that the interest on a 30 > year fixed home loan is calculated by the banks on purpose to be paid > at the beginning of the loan as you've shown on your excel sheet. > This is an arbitrary arrangement by the banks. The interest could > have been arranged so the principle so that both could be paid > together over the 30 years by simply adding the principle and > interest together and dividing the amount over 30 years. The reason > the banks do this, is to collect the interest first. That way, if the > borrower should decide to pay off the entire loan early, let's say > after 10 years, they will end up paying almost the entire amount of > principle. Look at your excel sheet and you'll see that after 10 > years, the accumulative interest is over $60,000 and the accumulative > principle is only $17,000. The pay off would be around $100,000. >
> This is what I'm talking about, banks purposely collecting almost all > of the interest up front. In my opinion, this is a scam. > > Mark > ************* In that case, you can scam the banks right back: http://www.nytimes.com/2007/06/10/magazine/10wwln-freakonomics-t.html
