Mortgage Question?

Question

This will be the first time i buy a house and and would like a little more clarification of when my lender loans me the $81,000 dollars to purchase my home and with $856.72 of a monthly mortgage, I have calculated to have paid back the $81,000 in about 8-9 years, yet i have to keep paying for thirty years and a total of $308,419.20 I understand an interest rate but $308,419.20 ??? With that type of loan I could have bought a mansion. Please help me understand.

Answer 1

If you borrowed $81,000 for 30 years, the interest rate would be about 12.4% in order to come up with a payment of over $850 per month. That is really high. Even if there is $150 per month of taxes and insurance in that number, it means your interest rate is about 10%. Have you finalized this deal yet? Unless you have horrible credit, you could do a lot better.

Here's a link to bankrate's mortgage calculator. It will also allow you to see an amortization table, which shows you what portion of each payment goes toward interest vs. principal. You'll see that the longer you pay on the loan, the more of each payment goes toward the principal. As others wrote, at the beginning almost all of your payment is interest (because interest is based on the amount you owe, and you owe the most at the beginning of the loan).

Answer 2

First, you won't ever touch the actual $81,000 dollars, they don't hand you cash to go pay for the home. They've qualified you for the loan, so that way the bank will back up that 81k. And yes sometimes it seems pretty crazy what you would be paying back in interest if you did keep that loan for 30 years. But the average homeowner only keeps their loan for approximately 5-7 years. Because they either Refinance to a better rate or purchase a different home.

You can always double check the rate you're getting now with another loan officer if you're afraid the rate is too high.

Answer 3

856 sounds like alot for an 81k loan- are your property taxes being rolled into that? Anyway- if you can do a 20 yr or even a 15 yr mortgage you should- also, see if you can make bi-monthly payments on your mortgage- so instead of paying $856 once a month you would pay $428 twice a month- If you do that on a traditional 30 yr mortgage you will pay off your house in 23 or so years and will have save alot in interest- you will also build equity faster.

Answer 4

You only pay 30 years worth of interest if you keep the loan for 30 years.

In the first years of the loan, about 90% of your P&I payment goes to interest. It takes about 22 years to pay off half your original balance.

However, make one extra payment every year, and you'll pay the entire loan off in the same 22 years.

There's tons of free online amortization calculators available. Search for a few. You'll see how payments are actually counted every month, how the balance drops, and many will let you add extra money to each payment to see what the reduction in time and interest will be.

Answer 5

Thats how mortgage interest works. Odds are you will not pay off the entire mortgage, and if you do it wont take you 30 years anyway. The first couple of year normally like 80% of your monthly payment is just straight interest.

Answer 6

Apparently you do not understand the interest.

Most of your payment is interest, it is not strictly principle, as you calculated it.

Also, there is insurance and property taxes added into your monthly payment that you are not taking into account.



Please tell me where I could get a mansion for 308,419.20? Basic starter homes are more then that.

Answer 7

Well, first of all, you're paying interest on the loan, and that really adds up. There might also be additional items in your mortgage payment, such as PMI, and escrow for real estate taxes and insurance.