I just refinanced my house for a conventional 30yr fixed mortage. I noticed that a majority of my mortage payment is going towards my interest payment vs. principal. But as I will pay down my mortage the principal will increase and interest amount decreases. Is this the way it usually works?
2007-05-28 14:48:07 · 9 answers · asked by www.npes.net 1 in Business & Finance ➔ Credit
That's exactly how it works. That's why, putting an extra $100 on your mortgage NOW (which goes straight to principal) will save you THOUSANDS down the road - it lessens the principal amount, which is how the interest is calculated.
2007-05-28 14:52:21 · answer #1 · answered by Anonymous 7 · 0⤊ 0⤋
Yes. When you first take out a mortgage, more money always goes on the interest and less on the principal. The longer you pay the more that goes on the principal and less on the interest.
Just a little food for thought...if you make one extra payment each year, you can lessen your interest payments by about 9 years. Meaning, you will pay off your house 9 years earlier. The best way to do that is take the amount of your house payment, divide by 12 and pay that extra amount each month. By the end of a year, you will have made a 13th payment and it will save you lots of money.
2007-05-28 15:00:07 · answer #2 · answered by ? 7 · 0⤊ 0⤋
Like everyone has said yes this is the way it works. Do try to put extra in with every payment, even if you just round up to the nearest hundred. Make sure that you specify that it for principal, sometimes it will go into your escrow account. Also the interest is lower the earlier in the month that you pay. If you keep paying a bit earlier each month you can make an extra payment.
2007-05-28 18:45:11 · answer #3 · answered by iluv2shop4u 2 · 0⤊ 0⤋
Absolutely! They want their interest first and principal second so they can guarantee that the money is paid off and then a whole bunch more! We have lived in our house for about a year and a half and paid over $20K in interest however only paid like $2000 towards principle! Sucks! Pay extra towards principle and save yourself money in the long run!
2007-05-29 22:19:53 · answer #4 · answered by Lindsay S 2 · 0⤊ 0⤋
Yes. All the interest is frontloaded early on in the payment process.
It suits the investor to do it that way so there is a bigger return on the money financed to a borrower.
The average a borrower keeps a loan is about 5 years, before they refi, sell, and then move to get another loan on a new property.
2007-05-28 15:00:06 · answer #5 · answered by Rick P 1 · 0⤊ 0⤋
Yes, at first you pay mostly interest... as you pay it off, you will be paying mostly principle.
Paying extra principle now will also make a HUGE difference at this point. An extra $100 with your normal payment could take an entire payment off the loan.
2007-05-28 14:55:42 · answer #6 · answered by Mike 6 · 0⤊ 0⤋
Yes. Also get a amorization so you can keep track on how much you're saving each month and date it and circle the interest you saved. The amorization will also give you the exact amount you have to pay in addition to your regular payment.
2007-05-29 18:22:31 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Absolutely. For at least half the life of the mortgage, more will go to pay interest than will go to principal reduction.
2007-05-28 14:52:56 · answer #8 · answered by acermill 7 · 0⤊ 0⤋
Just Try:
http://www.proloanz.com/
2007-05-31 22:19:34 · answer #9 · answered by Anonymous · 0⤊ 0⤋