Why am I making $650 payments on my 81000 mortgage? %9=$90000 so shouldnt my payments be $250 for 360 months?

Answer 1

Nope.

You have to pay interest on that $81,000. The first month you owe it, you owe one-twelth of the 9% yearly interest which is: $81,000 * .09 / 12 = $7,290 / 12 = $607.50 just in interest the first month. Subtract that $607.50 from your payment of $650.00 and you see you paid $42.50 toward the $81,000. The next month, it is ($81,000 - $42.50) * .09 / 12 and so on with the amount paid toward the $81,000 gradually rising. This snowballs and that's why it takes "only" 360 months to pay off rather than a few thousand years...

Answer 2

I agree that you are being screwed.
There are calculations on mortgages, you factor the following
1. Total amount of the mortgage
2. Percent of compounding interest
3. Payment frequency
4. Interest frequency
5. Length of the mortgage.

By your calculations, you really wanted a 3 year mortgage and paying only the principal amount of 8100 dollars plus 900 dollars in interest.
If your were a lender, 3 years is a little too long to wait for your money to make 900 dollars interest. Only banks can do this because they have alot of money for long term investments. Using that same argument, most likely, you probably signed up for only a few months to pay this mortgage out from a private lender. At the rate you are paying , you should be done paying in 15 months, with a slightly smaller payment at the last month.
That is not the best deal if you were charged 9%, but maybe at that time, it was your only option?
Check the contract you signed.
Maybe your next mortgage will be better. Experience teaches us these things. at least someone lent you the money at less than 10% (still too pricey * grumbling*)

Answer 3

You must be calculating simple interest. You pay compound interest. It is calculated monthly on the balance left to pay over the term of the loan and includes a bit of payment toward the principle. The principle decreases by a few dollars each month, so the interest decreases each month....yet you pay the same amount for the life of the loan. It ends up that the money you pay at the end of the loan is almost all to the principle payment and little for inthe interest.

Over the life of the loan, 30 years or whatever, you pay $153,627.96 in interest alone. That is the cost of borrowing.

THink of it this way, if you loaned someone money or put it in a bank, don;t you want payment on your money each month?

9% is a terrible mortgage rate...shop and refinance. Go to a b ank, not Vito's loan sharks. 9% is an auto rate, not a home mortgage. If you can get 6%, your payment goes down to $485.64 over 30 years. In fact, if you pay over 15 years, you'll pay $683.52 monthly and the total interest paid is 1/3 of your current payment $42,034.33

Answer 4

the 9% is annual interest (every year)
the mortgage company recalculates the interest every day
if you look at the paperwork there is probably something that says daily periodic rate; probably 0.02465%
every day they multiply your balance $81,000 by .0002465 which means they are charging you about $19.97 in interest every day. which means that you need to send them $600 every month just to keep the balance at $81000 and if you send more than that it will come off of the $81000.

Answer 5

First if you have a 9% interest rate refinance now, as in first darn thing in the morning, you are getting screwed!

Answer 6

Because of interest.

I = 81,000 (.09/12)

I = $607.50 You paid this much interest on your first payment.

Answer 7

You are paying RIDICULOUS interest, plus if your taxes are rolled into your payment, that will drive it up too.

If you have decent credit, refinance ASAP.

Answer 8

The entire $650.00 probably isn't going toward the $81,000, much of it is going toward interest.