--- 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. > > 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.
Your loan payment goes up, your principal goes down and your taxes go up, you chose. >
